UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 179-vHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFOREINTERNATIONAL DEVELOPMENT COMMITTEE
AID UNDER PRESSURE: SUPPORT FOR DEVELOPMENT ASSISTANCE IN A GLOBAL ECONOMIC DOWNTURN
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Oral Evidence
Taken before the International Development Committee
on
Members present
Malcolm Bruce, in the Chair
John Battle
Hugh Bayley
John Bercow
Mr Stephen Crabb
Mr Mark Hendrick
Mr Virendra Sharma
Andrew Stunell
________________
Memorandum submitted by DFID
Examination of Witnesses
Witnesses: Mr Douglas Alexander, MP, Secretary of State for
International Development, Mr Anthony Smith, Director,
Q238 Chairman: Good afternoon, Secretary of State. Thank you very much indeed for coming in with your officials. Perhaps for the record you could introduce your team?
Mr Douglas: Thank you very much
indeed. Rachel Turner on my left is the
director of international finance and development effectiveness. On my right is Anthony Smith, the director
for
Q239 Chairman: As you will know, we started this inquiry as we were moving through the recession. As everybody has acknowledged, nobody knows quite where we are heading but we discussed, when you gave us evidence in January, that the downturn was affecting developing countries. I think there has been a late recognition that it may be more severe than people had initially thought. Do you have a more up to date evaluation of what effect it is having? What are the most particularly severe effects, whether it is trade, remittances or aid?
Mr Douglas: I think there was a misplaced
optimism at the outset of the financial crisis that, because of the remoteness
from the global financial core, much of the developing world could potentially
be unaffected by the crisis of regulation in the banking system. Just as the idea of decoupling has been one
of the victims of the global economic downturn, similarly the real world
impacts are now unquestionably being felt within developing countries. The IMF now forecasts that world output will
shrink by between 0.5 and one per cent in this calendar year, 2009, with a
gradual recovery in 2010, but they themselves state that projections for growth
of recovery in 2010 are highly uncertain. Against that backdrop, world trade is
projected to fall by nine per cent in this year and that means there will be
direct impacts on many of the developing countries who have benefited from a
combination of export led growth, relatively low rates of interest and high
commodity prices in recent years. In
particular, capital flows to developing and emerging countries are also
expected to fall by 80 per cent from $929 billion in 2007 to$466 billion in
2008 and to just $165 billion in 2009, so there have been significant year on
year reductions in capital flows to developing and emerging countries. An additional source of financing for many of
these countries is remittances which are estimated may fall between five and 15%. As a consequence of these cumulative effects,
growth in sub-Saharan
Q240 Chairman:
That
is obviously the point of concern. I
notice the ODI's evaluation of certain countries is pointing out that this
comes on top of the food crisis which was focusing our minds nine months
ago. In reality, that does not appear to
have gone away, although prices have come down a bit. They are still historically quite high. I was surprised in other contexts to see
Mr Douglas: Yes. Let me just say a word in relation to that 90
million figure that I suggested. That
has been worked up by our own economists and it reflects the cumulative impact
of the food crisis eight or nine months ago that you spoke of and the rise of
fuel prices. For example, when I
previously travelled to
Q241 Chairman: Presumably that might alter the way you distribute your programme. You might change priorities.
Mr Douglas: Yes, and we can share our
thinking with you. It has affected in
some instances some judgments that we have made in terms of the sequencing of
announcements. For example, we front
loaded payments on social protection in
Mr Smith: As you know, a number of exercises are being conducted by organisations on vulnerability and we have already shared with the Committee the vulnerability matrix that was prepared by our chief economist earlier in the year. That was a helpful analysis of a number of the structural issues which would affect the likelihood of countries to fall into very serious impact from financial crisis. They are reliant on exports, on primary commodities, their manufacturing capacity, and their fiscal situation, etc. What we are trying to do now is move forward a step to getting the hard data coming in, relying less on if you like the theoretical analysis of structural issues and getting more and more information and more and more hard data about what is actually happening in those countries. As I think you know - I think the Secretary of State referred to it at the last session - we commissioned ODI jointly with the Dutch Ministry to conduct a number of case studies in a representative set of countries. The initial results are coming in now. We have some information for example which describes the balance of payments shocks in Uganda because of falling coffee prices and rising import costs; Kenya's falling share price index; a reduction in FDI flows; tourist arrivals; the number of miners out of work in Zambia; the relatively limited impact in some countries like Bangladesh, although their vulnerabilities are clear; some thematic issues coming through as well about falling remittances which is fairly widely reported and is quite high globally; the way in which a fall in FDI, foreign direct investment, would translate into a reduction in per capita income in certain regions like sub-Saharan Africa and the impact of things like a fall in cross-border bank lending in Africa and what impact that would have on poverty. We are taking that emerging hard data and other information from our country offices and beginning now to look at what further steps we can take to adjust our activities in response.
Mr Douglas: I do not know if the Committee would be interested in the ODI case studies.
Q242 Chairman: We do have a submission from the ODI.
Mr Douglas: Essentially, we have done the ten low income country studies and we have also done the thematic studies of which Anthony spoke. We have also tasked all of our country heads to report regularly to our own chief economist who is the holder of this data. We then work with the fund and the World Bank information that is available to us and that has really informed what we are doing. Anthony is absolutely right. Our key change since the last time I spoke with you is to try and move beyond a quick modelling exercise to understand what we anticipated would be the impact, to move into a position where there is real time data. In part the experience, short though it is, that we have garnered within the department informed our thinking about the global poverty alert which we then worked hard to secure support for in the G20. It might be helpful if Rachel said a word to you in terms of how that will inform the work that we and other departments are doing as we move forward.
Ms Turner: You might have seen that in
the
Q243 John Battle: This is the global poverty alert system, is it not?
Ms Turner: Yes.
Q244 John Battle: It will be a special unit then through the UN and it will be getting into real time information so some can send text messages in and the information will be put together, which I really welcome. We have come through from the vulnerability index that you have built up, coordinating it. Really, it is a single network, is it not, rather than an international body? The crucial question is who is the information targeted at? You vaguely mentioned world political leaders but sometimes we have lots of information and nothing happens. Who is the information that you have gathered together with this unit going to target to make something happen quickly? As well as collecting the information quickly I suspect we need really fast real time responses to the problem as well. Are there any ideas around that?
Ms Turner: Absolutely. Our diagnosis is that often at country level
we do have some quite good real time data.
We have the vulnerability assessment processes led by the UN, led by
groups of donors. That often stays quite
stuck either in very technical units at country level or maybe making its way
up to decision-makers at country level.
First of all, it is about targeting decision-makers at country level and
that does need to be improved, getting some of this key data out of the
technical units where it often sits. I
have seen that myself and we have talked about that before. Also, it is getting that data at the
political level. We are really pleased
that the
Mr Douglas: In terms of it being
available at the political level, we would expect coming out of the London
summit that it will be functioning and available to leaders by the time of the General
Assembly in September, reflecting your point about the urgency. This is not a commitment which we are
expecting will take years to deliver. It
should be functioning during the summer.
We would expect that it would inform the work not just of the UN but
also of the Bank and of the fund. I
fully take your point that information is no substitute for action but on the
other hand, if you have the political will allied to the right real time
information, that is a powerful combination as we saw in
Q245 John
Battle: I definitely welcome the information. The
Mr Douglas: That is a very fair
point. Immediately ahead of the
John Battle: To be fair to you, if you had not got that far and if it had not been for your leadership and DFID's leadership, there would not even be the system to press for the action so I thank you for that and I think you should get recognition for it. Well done.
Q246 Chairman: I think also Bob Zoellick had an informal meeting with us at his request while he was here for the G20. He made the particular point that he thought the progress of the recession would almost be reversed in developing countries. He said it was a series of waves. Also, I think he said anybody who was trying to make any projection should approach it with considerable humility, given that nobody saw where we were heading in the first place. He then said that whereas in the developed world it was the banking system that triggered the downturn of the real economy, it is the consequences of the downturn in the real economy which might essentially undermine the banking system in developing countries. First of all, do you accept that analysis and, if you do, is that going to be part of the alert system, because clearly that could create a secondary wave of problems that we have not contemplated yet.
Mr Douglas: Bob has been arguing that for some months. In conversations I had with him ahead of the summit and with the Prime Minister, he made exactly that point. I think that in part explains why, even several months before the summit, we were already looking seriously at what role the IMF could play in response to this crisis. At the point at which you had major fiscal stimulus allied to significant bank recapitalisation in OECD countries, we were very concerned that you could see a domino effect that Bob was warning of. If you have major national economies and central banks standing behind central parts of the global financial architecture in the developed world, there would not be that level of assurance and security in terms of developing countries. That is why one of the key prizes that we were seeking to secure at the G20 meeting was the very significant uplift in funds for the IMF, not simply because there was a clear expectation that there would be significant additional calls from the IMF, from countries like Turkey or in eastern Europe, but also to make sure that there were the additional resources that were required. Part of that financing of course also involved decisions taken in relation to SDRs and in terms of the impact I think it is about 24 billion in terms of low income countries that will be additional liquidity provided which will be available to those central banks and to those countries as well. It was something that was on our minds. To be fair to Bob Zoellick, he was on to it earlier and had been raising it for a number of months. That in part explains the decisions that we took.
Q247 Hugh Bayley: You are putting a greater emphasis on social protection as part of the response. As I understand it, you have been looking at your existing bilateral programmes and adjusting them, both in terms of the current year spend and future year spend, to provide additional resource for this new social protection priority. Can you give the Committee some idea of how much money you are seeking to find for social protection and where it will come from?
Mr Douglas: In terms of our planned
bilateral response to social protection, prior to the crisis we had planned to
spend 105 million on social protection in 2009 and 100 million on social
protection in 2010. After the crisis, we
estimate that this has increased by £50 million in 2009 and £50 million in
2010. Additional resources have come
from contingency out of unallocated funding and by relocation so total
bilateral spend, separate from multilateral spend, on social protection is now
estimated at 150 million in this calendar year, 2009, and 150 million in
calendar year 2010. We are supporting
social protection in approximately 30 countries and examples of the new
financing are that we are considering £35 million additional under phase two
which I mentioned. That is the
government of
Q248 Hugh Bayley: In round terms it is 50 million extra this year and 50 million extra next year. You say some of that has come from contingency but have other parts of the funding come from carrying back other bilateral programmes?
Mr Douglas: No. There were unallocated resources within our
bilateral programme.
Ms Turner: In the run-up to the summit we did an exercise around social protection to try and find out what the multilateral development banks as well were planning to spend on social protection, because it has been a key concern of ours that in past crises the multilateral system, particularly the World Bank, has not really focused on the poorest people. The system knows how to protect a balance of payments and it sort of knows how to protect a budget but really has not in the past worked out how to protect poor people. We were quite optimistic about the plans that we are now seeing from the World Bank, the African Bank, the Asian Bank and the Inter-American Bank on their increases in social protection, looking to new investments in social protection of about 12 billion between 2009/10 and 11, which is a significant amount of investment in social protection. It does feel different to the past.
Q249 Hugh Bayley: You have contributed 200 million to the banks' social response fund?
Mr Douglas: That is right.
Q250 Hugh Bayley: That comes all from the current year or over a series of years?
Mr Douglas: The 200 million will come over three to four years.
Q251 Chairman:
We heard
representations from the Local Government Association saying that they have
established relationships with a lot of developing countries and believe they
can do more. In a lot of cases, it is
about personal development - in other words, seconding staff who have
particular professional expertise and working with them. They have given us some examples of waste
management in
Mr Douglas: From recollection, I cannot
recollect having met the LGA. I may
have. I certainly have met the
Commonwealth Local Government Association and discussed the work we are
doing. Only this morning I also signed a
letter to Bob Winters, the Lord Provost of the City of
Q252 Chairman: I declare an interest in that I was lobbied by Richard Kemp, the leader of Liverpool City Council. He happens to be the international officer for the LGA.
Mr Douglas: I will get in touch with the LGA after this.
Q253 John Bercow: In response to written questions from the Committee on the spring supplementary estimate, the department told us that the cost of the exchange rate movements in the course of 2008/9 amounted to £122 million. That opens up the question of how those costs have been met, where have savings been found and whether some programmes have had either to be abandoned or cut.
Mr Douglas: I do not have the particular figures that you are speaking of, although I recollect the question. Our latest estimates are that the value of sterling aid has fallen by 26 per cent since last August and the value of the euro aid has fallen by 14 per cent since August last year. We do have obligations in terms of fixed payments which we make as a department. As you will be aware, the EU budget and contributions are fixed in euros but it is right to recognise therefore that there have been some examples where we have had to bear costs that were unanticipated. We do have contingency resources available to us in those circumstances. For example, in some cases, we have sought to procure some goods and services in sterling and euros. In other cases the change in support is offset by a fall in commodity prices. I cannot give you a definitive example of a programme that has been cut or reduced. I can assure you that we have been monitoring very closely the impact of the changes that have taken place in currency regimes in recent months. We have seen a six per cent rise in sterling against the dollar in recent weeks and as a consequence of that in terms of our own financial management and also our own programmes.
Q254 John Bercow: I think it is right to say that of that 122 million figure which came to us as a result of a written question, 110 million is for EU programmes. The vast majority of it is for that. I think ten million is the cost of capital charges and a couple of million is for administration costs. I note you say you cannot tell us today that any particular programme has been postponed or cut but I suppose, looking forward, what I am interested to know is whether the department has or will make an estimate of the likely cost of sterling depreciation in the current financial year.
Mr Douglas: Fluctuations in the values of currency are a constant feature of the international current markets. In that sense we are not in a position where we comment publicly on the level of sterling. That has been the longstanding position of the government and as a government department we are bound by that. This results in periods of increases in aid in certain circumstances and decreases in other periods. In that sense, it is not as if we are at this point betting for or against sterling.
Q255 John Bercow: Thank you for that. Let me put it a slightly different way. I think it is clear that the Treasury expects departments to manage the impact of exchange rate fluctuations. It would be an extraordinarily heartening and unexpected development if that were not the case, but it is not very surprising to hear that it is the case. What would be useful would be to be reasonably assured that the use of the reserve to which I think you referred a moment ago was minimising an impact on country programmes.
Mr Douglas: For clarity's sake, I spoke in terms of our own contingencies held within the DFID budget. We have not made any claim on the reserve in relation to currency depreciation. It might be helpful if I write to you and set out the position, because clearly this is an issue of concern to the Treasury. We are not the only government department dealing with denominated currencies and in that sense there are expectations laid upon us, perfectly reasonably, by the Treasury in terms of how we manage the resources that have come to us through the spending review.
Q256 Chairman: It might be helpful if you could give us a little bit more in a paper on how you manage that. You have said that fluctuations in currency are the norm. How do you build that into your planning? You have said on another occasion, "We had unallocated resources", which of course is a convenient answer when people are saying, "If you were really spending at the limit, you would have to cut programmes." I am not criticising but I think it is quite helpful and important that the Committee understands how you do manage resources and what you hold back to allow for that and how it works. Otherwise people immediately assume that if it is coming from there something else does not happen.
Mr Douglas: Sure.
Q257 Andrew Stunell: There are two elements to the currency fluctuation problem, one of which is you having to take money from somewhere to prop up those budget heads which are paid for in euros or dollars. There is also the question of direct payments which are made in sterling to developing countries, where their anticipated use of that is going to be greater than the reality because the international value of sterling has dropped. Is there any part of your thinking which takes account of that or is it just hard luck on the receiving countries that the pounds they have will not go as far as they had planned and you had expected?
Mr Douglas: The currency depreciation of which I have spoken over a number of months has coincided with a period when, to the benefit of many of the countries in which we are working, we have seen falls in the level of oil, food and some other commodities. In that sense the transaction is not all one way but it is an inherent feature of any agency, including the government's Department for International Development, that there are going to be currency fluctuations. It is not unprecedented that there have been variations in the level of dollar aid and sterling aid that is provided. That does vary over time in terms of its impact on purchasing power, but the only issue is not that of currency levels. There are also other factors. For example, commodity, oil and food prices.
Mr Smith: We have spoken a little bit about this with our regional divisions. It is possible to overstate this impact because it does depend on the way in which the money is used in each country. If it is spent in local currency, it just depends on what that currency's exchange rate is at the moment. Exchange rates have fluctuated quite a lot in many of our partner countries as well. It is not an even picture across the world. If there is direct procurement in dollars, there will be an impact but that is not uniformly the case. There is quite a wide range of circumstances that applies across all of our partner countries. It is not a uniform impact.
Q258 Chairman:
We
came back from
Mr Smith: The commitment is almost always in sterling, so we pay in sterling.
Q259 Chairman: They can hold it or change it according to their own judgment?
Ms Turner: Yes. We pay it in sterling and they can immediately decide what they do as part of their reserves management.
Q260 Andrew Stunell: If we go a step further, the obvious dollar transaction is for oil. Oil has been going down, as you say, but in broader policy terms they get the pounds that you send them and, after that, it is their problem. Would that be a fair summary? Your allocations do not vary to take account of those fluctuations.
Mr Douglas: It would not be a fair summary, not least because we want to make sure that the money we give them is spent on what we give them the money to spend it on. It is not as if we hand over a cheque and then it is over to them. We have an understandable interest on behalf of the taxpayer in following how money is spent. One also has to recognise the extent to which there are currency appreciations and depreciations in some of our partner countries. There are constant currency changes and it is a matter of record that we do not offer a running commentary on those. One has to ask the questions in terms of not least the administrative burden of trying constantly to be changing one's aid programme, not least given our expectations in terms of aid predictability, depending on what happens to the level of sterling, the dollar or the partner countries' currency. In some of the conversations that we have had, there has very clearly been virtue in the relative simplicity of predictability on the basis of the contributions and the undertakings that we have given, albeit that that takes place in the context of a global market in which there are floating currencies.
Q261 Andrew Stunell: Could I just rephrase the question a little more neutrally then? Given that over the last 18 months there have been severe fluctuations, particularly in oil but also in food and commodity prices, and there have been fluctuations in sterling, has that new climate of volatility led you to give any consideration to, in the future, developing something which is more reflective of those changes; or do you intend to carry on on the basis you have just outlined?
Mr Douglas: That was part of the Prime
Minister's work at the G20, was it not?
If one says volatility is one of the attributes of a globalised market
involving more than a trillion dollars crossing gross national boundaries every
day and a failure of global regulation, it was exactly to try and address some
of the inherent instability that has been revealed by this unprecedented crisis
that we worked to gather 20 global leaders together and build a consensus. That requires both reform of the IMF and the
World Bank. It requires a greater degree
of global supervision of those currency markets and it requires a new
international regulatory order. All of those are areas which we are keen to
pursue but which require consensus beyond the
Q262 Mr Hendrick: The largest single beneficiary of the recent G20 summit was the IMF. Looking at some of the commitments that the IMF is making, it would seem that many of the countries it is assisting it is assisting in the area of balance of payments problems. Clearly, many of these developing countries have pressing needs. We talked about social protection, where there are obviously some very important commitments being made, but others include the development of infrastructure. With this emphasis around balance of payments and other problems, how effective do you think that money is going to be if it is not really looking at some of the other development loans?
Mr Douglas: In the first instance, I
think there was a recognition ahead of the G20 summit that the IMF was
undercapitalised for the task that was being given to it. In some ways, some of the confusion as to the
respective roles of the Bank and the fund over a number of years has arisen
because, in past balance of payments crises, there simply has not been adequate
capital within the fund to be able to deal with it independently, so calls have
been made on the World Bank to engage effectively in crisis management. One of my hopes coming out of the G20 summit
in
Ms Turner: On the role of the IMF in low income countries, we think that IMF financing is extremely important. The type of financing that you get from the IMF is critical for countries to see them through the crisis. The kind of fast dispersing support that comes from the fund is exactly what many low income countries need at the moment. It comes quickly. It does not have long appraisal times like investment projects from the multilateral development banks, for example. The outcomes at the summit we think were really good on the IMF for low income countries. There were two key parts to that. The first is that the access limits for low income countries were doubled. The G20 leaders agreed to call for a doubling of those access limits and we are fairly confident that that will get through the IMF board. That means that countries can have twice as much of their quota allocation as they could have before. Before, they had a limit of 75 per cent. That would double to 150 per cent. That applies to both the exogenous shocks facility and to the main IMF poverty reduction and growth facility. The reason why doubling access limits was so important was because the IMF had sufficient financing for low income countries unused. The binding constraint was the access limit, which was related to quota and in this current environment that was just not helpful. The second agreement at the summit was that gold sales would be used to increase the amount of concessionary IMF funding. We hope that that will be discussed at the spring meetings this weekend and that a decision will be taken soon about that. As part of that, there are ongoing discussions about how concessionary IMF financing for low income countries should be. There is the possibility, not yet agreed in the board - but it is something that we think is important to discuss - that the concessionality of IMF financing should be improved. IMF financing is currently about 30 per cent concessionary compared with IDA's 60 per cent for example. Now that gold sales are on the agenda, we have the possibility to talk about more resource to further buy down the terms of providing support for low income countries.
Q263 Mr
Hendrick: Some of the figures bandied about around the
G20 were very impressive indeed. Some of
the pledges that were made included existing commitments and contributions by
particularly
Ms Turner: I will start with the multilateral development banks, the extra 100 billion. Prior to the crisis, the multilateral development banks as a group - in that definition we do not include the European Investment Bank but that is the Asian Bank, the African Bank and the Inter American Bank, the World Bank and the EBRD - were planning to lend about 200 billion over the next three years. The additional 100 billion is made up of the multilateral development banks doing more with their existing balance sheets. The World Bank particularly has a lot of capacity on its balance sheet to do more. It agreed to do an extra 60 billion. The remaining extra 40 billion has come from additional capacity in the other multilateral development banks but also from a capital increase in the Asian Bank. Those are real, new resources that are coming off the balance sheets that were not already there.
Mr Douglas: We have been arguing for some time - to be fair to Bob Zoellick, he moved quickly on this - for that lending because if ever there is a point at which the banks should be fulfilling its role now is that time. Difficult though it is to argue that notwithstanding a very strong credit rating agency profile at the moment the Bank could do more with its balance sheet, that is what we had been arguing. It did not appear as if the headline was around the bank after the G20 communique. It was in large measure because the bank management, working with shareholders, had already taken the decision effectively to trim rates of lending; whereas the headlines were attracted obviously to the uplift in resources.
Q264 Chairman: Does that not sound a little bit like the multilateral banks doing what the commercial banks just did that got us into this mess in the first place?
Mr Douglas: No, because we have very great confidence in the strength of the balance sheet of the World Bank. It is triple A rated and we would not, obviously not least in these circumstances, wish to compromise the creditworthiness of the bank. We are absolutely convinced - and in fact bank management came to be convinced of this as well - that, if there was a time at which the World Bank was fulfilling its responsibility to recognise market failure where it existed, step in and provide additional resources and capital to those countries where capital was drying up, now was the time to use the strength that had been accumulated in the balance sheets.
Q265 Chairman: Conversely, it implies that it was being rather cautious before.
Mr Douglas: Candidly, that has been the position that we have argued for some time, certainly since I have been at the Bank as the British governor. I have been arguing that the very strength of the balance sheet was not, in and of itself, going to make as effective a contribution to tackling poverty as if, obviously within the bounds of responsibility, it was using its balance sheet effectively.
Q266 Mr
Hendrick: Coming back to the gold reserves and the
restatement of contributions by the EU
and
Ms Turner: This is really the Treasury domain, the role of the IMF for middle income countries where these really big numbers are. The IMF had existing capacity of 250 billion going into the summit. What was agreed at the summit was additional, new resources for the IMF of 500 billion that would be made up in various ways, including the idea of market borrowing that was agreed as a possibility at the summit, but also including voluntary lending from G20 members and from the EU. The new resources were 500 billion. The other big, new number agreed at the summit was the new SDR allocation.
Q267 Mr
Hendrick: Does that include the
Ms Turner: The
Mr Douglas: I was with the Prime Minister
when he travelled to
Q268 Mr Sharma: Oxfam and Action Aid have expressed their concern that the large increase in funding for international financial institutions has occurred without the implementation of the promised government reforms. How do you respond to those concerns?
Mr Douglas: With the greatest respect for
the question, if I had a pound for every time Oxfam and Action Aid expressed
concern, I would probably have almost as much money as the IMF. In that sense, they were generous in their
comments in relation to the progress that we made in
Q269 Chairman: For clarification on the gold reserves, how much are they selling in proportion?
Ms Turner: The decision has not been taken by the board yet. The language in the agreement was, "We have committed that additional resources from agreed sales of gold will be used together with surplus income to provide six billion additional concessional finance for the poorest countries over the next two to three years." Exactly how much gold is sold to deliver that is something that is going to have to go through the IMF board. Part of the issue is about the extent to which some of the proceeds would be used to subsidise resources as well as extend resources. It is quite a complicated equation. There is a set of options that have been worked up for the board and decisions will be taken. We do not have the answer yet but we are really pleased it is happening fast. It is great.
Q270 Chairman: The other thing that Bob Zoellick called for was for people to put 0.7 per cent of countries' stimulus into the vulnerability financing facility. When we met him we had a discussion with him about that. The department has committed 200 million to the rapid social response fund and you are also putting money through CDC into the global trade liquidity programme. Do you consider that as your response to that specific call?
Mr Douglas: Bob Zoellick's proposal did not find favour at the summit.
Q271 Chairman: Why am I not surprised?
Mr Douglas: There was not a widespread consensus in favour of the proposal. While it was always stretching, although I have great respect for Bob Zoellick, I am not sure it would have been the most effective response the G20 could have taken, partly because - as we have reinforced today in terms of decisions taken by the Chancellor in the Budget - all was held to the centrality of 0.7 per cent GNI as being what we should be urging and working to secure from our partner countries in the OECD and in the G20. In that sense, I was concerned when this proposal was first publicised in the newspapers that it could provide something of a get out of jail card for countries who were not meeting the bigger obligations that they had in terms of prior commitments they had made to overall spend as a proportion of their economy and they could instead say, "We have quite a small stimulus package and we are managing 0.7 per cent of that." From a policy point of view, we were always of the view that the important prize is to sustain commitments that have been made by major donor countries and, at the same time, to recognise the urgency of what we were being told by developing countries ahead of the summit. That was not specific to 0.7 per cent of all the stimulus packages. They were saying, "We need major, significant, additional resources from the IMF. We need to make sure that we are able to effectively get money out of the door in terms of social protection and other issues from the World Bank." Critically, there was a great deal of concern which was why we worked very hard in terms of the new global trade liquidity fund, because there was very real concern being expressed that, with 90 per cent of global trade being reliant upon trade financing and effectively that market having failed in recent months, the G20 needed to act quickly in relation to trade financing. We did consider the proposal. Of course we talked to Bob about it, but ultimately we reached a judgment that the goals we were working towards, in terms of our individual support where we provided money in terms of social protection and in terms of our stewardship of the overall process, were better focused on the IMF, on the Bank more generally and those who owned the trade financing piece as well.
Q272 Chairman: I take your get out of jail point but Bob Zoellick would say that it is fine to refinance the IMF. The IMF has an important role but poor countries are being very hard hit by the downturn in richer countries and they need specific spending programmes, whether it is infrastructure or offsets for the loss of trade or whether it is east African horticulture or what have you. Whatever you call it and however you deploy it, that was his fundamental point. He says, "Here you are, rich countries, putting money into your economies. It is fine to refinance the IMF but where is some hard cash that can be spent now in poor countries over and above what is already committed?"
Mr Douglas: If all we were doing was refinancing the IMF, important though that is, that argument might have more favour. I think this is something of a fallacy which is abroad amongst some commentators on development budgets: the poorest people in the world would have suffered more if the global financial crisis had not led to the collapse of the banks last September. As surely as people in the United Kingdom, people in developing countries, had an interest in avoiding the melt down of the global financial core last September, that is why I make no apology for the actions that were taken in the United Kingdom, in the United States and elsewhere in securing stability of the global financial architecture at that point. Secondly, however, we do recognise that there need to be sources of financing directed into developing countries in addition to the IMF resources which will be critical in standing behind the central banks and governments in developing countries as surely as the OECD countries. That is in particular why we have supported already an uplift in terms of capital in relation to the Asian Development Bank. It is why we are already engaged in discussions with the African Development Bank. On your point of infrastructure, we are already engaged in discussions.
Q273 Chairman:
I
agree with that and we have applauded you for it, but that was a commitment you
made before this crisis really hit. We
as a Committee recognise that the
Mr Alexander: I am not a person who needs to be convinced of the need for continuing support for developing countries ---
Q274 Chairman: I know you are not.
Mr Alexander: --- if you look at the conversations that have taken place in Government in recent weeks which have resulted in the fact that today as a British Government, notwithstanding the very real financial pressures that both British citizens and the British economy are facing as a result of this global financial downturn, we have reconfirmed our commitment to the ODA targets that were set at the beginning of the Spending Review. As a Department, we will see in excess of an 11 per cent rise for the remainder of the Spending Review in terms of our bilateral budget. We are working hard both to keep the promises that we have made, to identify new sources of financing and, as I say, I would cite the example of trade finance as an issue which has emerged post the crisis and needs to be responded to. I would secondly identify the issue of making sure that the World Bank, which has very considerable resources, actually meets its obligations in the unprecedented circumstances of this crisis as well. We have worked collaboratively with the Bank to effectively triple the level of lending that is going into those countries.
Q275 Mr Hendrick: Just following on from that point, Chairman, I do not think there is any doubt about the Government's commitment, the Department's commitment and your commitment, and that was made clear in today's Budget Statement as well. Just coming back to Bob Zoellick, do you not think if Bob Zoellick had maybe packaged his argument differently, rather than 0.7 per cent and it was a figure that did not relate exactly to what people should be doing in terms of their GDP anyway, it would have come across a bit better? Is there not a figure to be aimed at, either a percentage or an absolute figure, that Bob Zoellick could have made a much stronger argument on and maybe would have got a better result on?
Mr Alexander: I am renewed in my admiration of Bob Zoellick, he is a talented man. I think he felt attracted to 0.7 per cent for each stimulus package because of the coincidence obviously with 0.7 per cent of GNI as the UN gold standard. My view, respectfully, is different in the sense that I think to introduce 0.7 into the debate that dealt with financing ---
Q276 Mr Hendrick: One per cent would have been more powerful because it would not have seemed like 0.7, it would have been more than 0.7.
Mr Alexander: This is a judgment, but my judgment is to identify either 0.7 per cent or one of per cent of an entirely variable figure is far less potent than making the longstanding and even more urgent case now for 0.7 per cent of your total economy because where you get the big numbers, the commitment, the clarity is around a group of political leaders reaffirming a commitment to what is a fixed proportion of their global economy as distinct from spending a lot of capital trying to secure what in some circumstances would be 0.7 per cent, or in your case one per cent, of a stimulus package that would be entirely driven by national circumstances.
Q277 Mr Hendrick: So you do not think it was right to actually earmark any proportion of the stimulus package to this?
Mr Alexander: I think it is entirely right
to identify the fact, as Bob Zoellick has done on innumerable platforms, that
the needs of the poorest people in the world need to be recognised in this
crisis in a way that tragically in past crises they have not been. If we agree on the end, then I think we can
respectfully disagree as to what is the most effective means by which to ensure
those needs are addressed. I believe
that by continuing to urge, implore and work with other countries in the G20,
the OECD and elsewhere to secure their longstanding commitments to provide the
commitments that we reaffirmed today here in the
Q278 Chairman: Some NGOs are saying nevertheless that what is going to happen in this situation is the best that the poor can hope for is that they will stay where they are and, indeed, your own figures suggest that staying where they are means going backwards unless there is something extra. I think you made a very powerful case for saying that, of course, if everybody just fulfilled their commitments that would get us there, so I do not think there is any point in pursuing that, but at the same time you can see the Committee sees a resonance in what Bob Zoellick is trying to do and the way he is trying to push people who perhaps have not responded in other ways.
Mr Alexander: To be fair to Bob, I think he did exactly what was expected of him at the summit, which was to be a voice for the poor, and in that sense there was great integrity in what he was endeavouring to do in making that case powerfully to other leaders.
Mr Hendrick: Paraphrasing Bob's approach, what he is saying is if you are putting your hand in your pocket to give this extra to get the world economy going again, why not just give a small fraction of that to the Vulnerability Fund. I do not think there is anything wrong with that but what you are saying is by coming up with any figure and the fact that that stimulus package is much smaller than countries' GDPs makes it seem less relevant or too small a target in terms of a contribution.
Q279 Chairman: Or a cop-out.
Mr Alexander: My point would be to say the prize coming out of the G20, I believe, and this partly reflects the conversations that I had, so if you sit there with the Prime Minister as he works hard to convince President Lula in Brazil to make new and additional commitments, if you sit there and listen to the case that he makes to other leaders that the needs of the poor need to be respected, one of the insights you garner as one of his secretaries of state is the fact that we need to be promiscuous as to what countries can do and are willing to do in terms of different channels of financing. In some instances it is appropriate that countries that have large surpluses say, "We're going to make a bilateral loan to the IMF", and in other circumstances there are countries that are not meeting their aid commitments and you can say, "Listen, you have got a moral obligation to move towards the commitments that you have made where you are adrift at the moment". In other circumstances you can say, "Can you work with us together in the World Bank to triple the level of lending that the Bank can deliver because if there was ever a time that the Bank needs to fulfil those obligations, that time is now". In that sense, I am not convinced that it would have delivered better development outcomes for the poorest people in the world if we had spent what political capital we had going into those negotiations in trying to deliver a single channel of financing as distinct from sitting down with leader after leader after leader around the world and saying, "What can we do together to actually address the needs of the world's poorest people?"
Q280 Hugh Bayley: What do you hope the spring meeting will achieve this weekend?
Mr Alexander: My hope would be that we will be able to reinforce the urgency that we have been speaking of, of the immediate policy measures that the Bank needs to take to fulfil its historic obligations in these difficult circumstances. Part of the Development Committee's job is to make sure that the resources are flowing effectively and in a more rapid response than at times has been the position of the Bank in the past. As I said in an earlier answer, I think the challenge is not to lose sight of the prize of reform where we are focusing on the immediate resources of the crisis and in that sense I hope - I am not certain that we will be able to deliver it but I was speaking to other governors only this morning in trying to build a consensus for this - we will use the opportunity of the G20 to build some momentum around further reform of the Bank itself, that I will be able to share with other governors our emerging thinking on the process that Gordon will lead looking at both the IMF and the Bank for the G20 ahead of further discussions, and we would ideally be able to have a coincidence of reform proposals in front of us in six months' time. The thinking in my own mind is to say can we get to a position where the Zedillo Commission, the work that Gordon has been charged to take forward by the G20, and our own governor-led process can come together so that we can have a serious and substantial discussion about reform in October ahead of what the G20 urge that we do, which is actually make decisions on reform in the spring meeting in 12 months' time.
Q281 Hugh Bayley: The last time you came before this Committee you disagreed with the estimates made by some of the NGOs about the losses to revenue in developing countries that come about as a result of tax evasion and you said that your Department, together with the Treasury, was studying the problem and by implication trying to come up with a more accurate estimate of the losses that tax evasion entails for developing countries. What progress has been made in that work?
Mr Alexander: I cannot give you a figure
today, but I hope that I can give you comfort that real progress has been
made. If you were to look at one area
where political space has opened up for progress both around and after the G20
it is this issue of tax havens. I would
acknowledge and pay credit to Members of this Committee but also a number of
campaigners from CSOs across the
Ms Turner: On tax havens and the summit, you will have seen the communiqué and that OECD did publish the list of jurisdictions on the day of the summit and there was a lot of movement before the summit with many countries moving into a more acceptable rating. Particularly important for us, for the developing countries as a whole, was the G20 commitment to develop proposals by the end of 2009 to make it easier for developing countries to secure the benefits of these agreements on tax information exchange. The Prime Minister has now written to the head of OECD trying to set that work in train to make sure that we do meet that timetable. The idea that we want to make progress on is that we develop an effective multilateral tax exchange information system to allow the poorest countries a much easier way to access information exchange and that is the proposal that was made by leaders at the summit.
Q282 Hugh Bayley: I welcome very much the emphasis which the G20 placed on tax evasion and the leadership which our Government provided, but I am slightly alarmed by talk about a multilateral agreement because I would not want the best to be the enemy of the good. I suppose the critical question is this: post-G20 are there any new sanctions that could be applied against jurisdictions that do not meet their international obligations, the obligations under the OECD guidelines? For instance, of the 42 countries with poor performance that were identified by the OECD when they published the information, seven were British dependent territories and three of those seven - Anguilla, Montserrat and Turks and Caicos Islands - signed up to the OECD package when it was launched in 2002 but still have not signed a single bilateral agreement. What can be done to get movement from those jurisdictions which are defaulting?
Ms Turner: There are two things there. First of all you asked about sanctions and the G20 in the side paper to the communiqué that you will have seen did agree the principle of sanctions and actually agreed a list of possible sanctions. In the context of the summit that was probably very much a threat and working those up into a more formal process of sanctions is still work that has to be done.
Q283 Hugh Bayley: Which will be led by who?
Ms Turner: Sanctions by the OECD, the Global Forum on Taxation. In terms of your question about some of the smaller overseas territories, which of course have now moved out of the very bottom tier of ranking, they are in this middle tier that was in the OECD list of tier of countries that have signalled their intent to get better ---
Q284 Hugh Bayley: Signalled several years ago and yet to come good on that signal.
Ms Turner: Yes. Where we are in the UK Government is that we now do have a clear commitment and clear work plan from the FCO with the Revenue to work with that group of countries to get them up to the next tier. There is a very clear programme now to work with them to move them up to that next level.
Q285 Hugh Bayley: If I may say so, from colleagues, members of parliament from other EU countries, I have been on the receiving end of some finger wagging because some of these jurisdictions are not countries, independent states, they are British dependent territories, and although I know that there are very clear rules about the affairs which are matters for local governance and the affairs which the UK has the ability to overrule the local jurisdiction on, such as defence and security issues, I think it is increasingly a problem for the UK that there are countries which are sheltered by us politically which come under our wing that are not meeting their commitments in relation to the OECD guidelines. Either they need to do so without us taking further powers to compel them or else we do have to open serious negotiations with them about changing the balance in power for things that they are responsible for locally because our good name, the UK's good name, the good name of the City of London, can be besmirched if we are not seen to be doing what is right and the dependent territories doing the same.
Mr Alexander: I think you raise an important point. The standard answer that would have been offered by Development Secretaries in the past ahead of the summit would have been to say, "We take these points very seriously. It is a matter for the Treasury lead, I will communicate those points to my colleagues in the Treasury", but I will just say having served in the Foreign Office for a couple of years it is very significant that we now have the FCO co-ordinating this because they are obviously the Department with lead responsibility for the overseas territories. The point that you have made has been heard very clearly in Government and there is a determination, partly reflecting the changed circumstances because it is inherent in dealing with tax havens that you do need at one level a multilateral response, that everybody moves together and closes off those areas which are otherwise beyond scrutiny, but not least the Government is very mindful of the fact that these decisions at the G20 were taken under the Prime Minister's chairmanship and that is why already the FCO are co-ordinating with HMRC, with the Treasury and ourselves because it is an issue which because of the development impacts we have been concerned about for some time. My hope is that we will see real movement on the basis of the co-ordination that the FCO are leading.
Ms Turner: I would only say that as part of the follow-up to the summit the Prime Minister has written to the overseas territories urging them to quickly comply.
Chairman: I am sure the Prime Minister has been on the receiving end of the same finger wagging.
Q286 Mr Crabb: The G20 communiqué restated international commitments to bring the Doha Round of world trade talks to a successful conclusion. Back in December we had an identical hope expressed after the Financing for Development Conference and we have heard similar things before. Do you agree that we are almost locked into a kind of Groundhog Day where we hear UK ministers and ministers from our international partners using the same formulation of words, recognising the importance of the world trade talks, expressing hope to bring it to an ambitious and quick conclusion? Can you give this Committee today any grounds at all to be optimistic that these talks will be brought to a conclusion in the foreseeable future?
Mr Alexander: Modesty forbids me from
saying that this weekend I will meet Ron Kirk, the new US Trade Representative,
and that in itself will herald the great breakthrough we have been waiting for
in the WTO! In all seriousness, we are
already engaged with Pascal Lamy and with others to see whether there is
further scope for making progress at the G8 meeting which is taking place in
July. We worked hard to get the language
in the G20 communiqué around
Q287 Mr Crabb: While we wait for that and take some encouragement from that, are there any other steps that the UK Government can take to support trade in developing countries? What more can you and your colleagues be doing?
Mr Alexander: If you look at the steps that one of my colleague ministers, Gareth Thomas, took only last week in terms of a new initiative in relation to aid for trade for the southern corridor in Africa, if you look at the commitments that we already have in terms of aid for trade, or more substantively if you look at the announcement that was made in terms of trade financing, that will have a real and material impact coming out of the G20 in terms of the availability of these countries to be able to secure credit to be able to trade effectively. I mentioned earlier that I had been part of the conversations with President Lula ahead of the summit taking place in Brasilia and probably the single biggest thing that he identified, and this was then reflected in other conversations with heads of government in Chile, was the fact that as an export-led country Brazil desperately needs to be able to access lines of credit for its trade to continue. That is equally true of African countries. In that sense, if we got the global trade liquidity pool up and running quickly I think that will make a significant difference to what would otherwise be very, very serious consequences as a result of the loss of trade finance in developing countries.
Q288 Chairman:
I
just make the point that was made to us in
Mr Alexander: Actually, it has not been a point that has been made to me directly either by President Kikwete or by other heads of government. There are broader issues in relation to aviation. I speak with some knowledge of these issues as a former Transport Secretary. When I was Transport Secretary I argued that we needed to look again at the Chicago Convention, which is essentially the Convention that precludes the taxation of kerosene on international aviation but was written in the 1940s in a period when there was neither any recognition of issues of contemporary security or, indeed, of contemporary sustainability, of climate change. I was intrigued and surprised to see there was an editorial in The Times either yesterday or today arguing that the Chicago Convention needed to be looked at. We have argued for that for some time. There are broader issues because whether it be through the kind of work that UNITAID has done in terms of taxation on aviation tickets, or a precept on aviation tickets to be used for financing for health expenditure, whether it be looking ahead to Copenhagen where aviation is going to be one of the elements and identifying sources of funding for the global carbon market, these are all issues that are going to be important but it has not been something which has been raised with me specifically in relation to tourism.
Chairman: It is relevant to the other inquiry we are doing, so we are going to come back to it. We were specifically and explicitly lobbied.
Q289 John
Battle: Could I ask a question about public support in
the downturn. As you may know, our
Committee has been out to the regions, to
Mr Alexander: To be honest, the methodological question has not and I will be interested in the Committee's thinking when we see the report that you subsequently publish, and in that sense if you have got recommendations in terms of how we can improve the tracking then of course we will give them very serious consideration. On the broader point, of course I am worried in terms of how we sustain support for development in the present economic circumstances. When I spoke to some of the NGOs after the Budget Statement today and was able to confirm that we are holding to the ODA commitments that we have made, they said, "We are very grateful" and I said, "The one thing you can do for me is to make sure that you urge your supporters to continue support for this level of expenditure and the rising level of expenditure we are seeing now and into the future". The risk, notwithstanding the interdependent and global nature of this crisis, is that people are always susceptible at this juncture to turning inwards and thinking there is a way that either we can secure prosperity or stability in Britain by ignoring the rest of the world or not recognising that while our livelihoods are at threat here in Britain, lives are at threat and being lost in the developing world. I am very mindful that we need to keep working at this issue.
Q290 John Battle: Maybe building that into the questions in some way. Something that appeared after the Budget on the television, and again there will be controversy about the particular detail, was I was encouraged to see two people having a great argument about scrapping the car and getting £2,000 because it sparked off a conversation where someone said he had got a green car and he did not get any money to buy it but, on the other hand, tackling the environment was an important issue should we subsidise it or not. I think if we had a healthy debate so that people were not thinking in boxes about the environment, boxes about the health service and education and boxes about international development, but if we had a broader discussion and deepened the debate then frankly we might make more progress.
Mr Alexander: Absolutely.
Q291 Andrew Stunell: The same survey showed a third of respondents believe that people in poor countries are less deserving of aid and more than half of people think that aid to poor countries is wasted. Your messages very often seem to be designed to go to those who are already on-side rather than to the sceptics. Have you looked at what messages might be appropriate for the sceptics and beyond the message what the reality is that you could put to them?
Mr Alexander: If you look at our coverage in recent months, we have had feature stories in the Daily Mirror and the Sun and we featured prominently in Comic Relief this year. We are consciously seeking to broaden the range of outlets in which we communicate the message that development works. It is also fair to recognise, and I am sure the Committee would accept this point, politicians are not always deemed the most credible or effective public communicators these days and in that sense when, for example, I had a recent meeting with Bill Gates and he was talking about what he could do to support the efforts that are being made here in the United Kingdom, I fired back that one of the first things he could do would be to come and lend his business credibility to the premise that aid works, because he is an individual who is rightly recognised for a very significant series of achievements in his business career and if he stands up and says, "Listen to what the Gates Foundation and other exemplary donors are doing in terms of tackling HIV or AIDS" then probably he will be given a hearing. In that sense, we are always looking not just at what we do ourselves, which we keep under constant review, but also who are the other trusted third party endorsers who can make the case that development does work and that the needs of many of the world's poorest people do need to continue to be considered.
Q292 Andrew Stunell: You have launched a review on building public support for development. Are you giving us a hint of the direction in which you think that should go, with more work with third party endorsers rather than Government and departmental initiatives?
Mr Alexander: I do not think that lessens
our responsibility to make sure that our messages are targeted, relevant and
effective. In that sense you are right
to recognise we have this work under review.
I am also encouraging in the process of our White Paper consultation my
colleague ministers and myself to get out and about around the country. We are doing events in pretty much every
region of
Q293 Mr Crabb: Does it bother you that only 22 per cent of respondents to the survey that my colleagues have mentioned say that they have ever heard of DFID and 54 per cent say that they have never heard of your Department?
Mr Alexander: I have thought a lot about
this and if I am honest I am not sure that is the true measure of our success
as a Government department. The standard
answer is to say, "Well, look at what the International Development Act says,
it is about raising awareness for development, not raising awareness for the
Department for International Development".
My real objective would be to get to a place where the expenditure that
was reaffirmed today is deemed to be as central to
Q294 Mr Crabb: Secretary of State, are you saying that the question that your survey asked perhaps is not even relevant?
Mr Alexander: No, I think it is relevant,
it partly stimulates conversations like this.
It is helpful to us to know whether there is high recognition of the
Department or not, is there high recognition of the work, how do people feel
about the work that we are doing. I am
not concerned that we get that information, but if we get that kind of
information we are able to make better decisions. One of the reasons that I think the right
goal to aim for is to say what is the best vehicle of communicating to the
British people the critical work that we do and how central it is to Britain's
sense of self because when you look at the evidence there is not a natural
emotional attachment that people in Britain feel towards Government
ministries. You can actually build quite
a strong emotional attachment towards the work of the National Health Service,
the work of the BBC or, I believe in time, the work that
Q295 Mr Hendrick: As you say about the NHS or the BBC, there is that instant recognition. When we are criticised as a Government from the likes of Oxfam or Christian Aid many of the public who are contributors to those organisations take it as read that these organisations are working for good purposes and they are the sorts of organisations that you would support, and the recognition of DFID by so few people really puts that into context. Married to that, when we were abroad, like we were in Kenya and Tanzania, when we spoke to people who were either recipients of aid or organisations using that aid, the recognition factor was very, very small. I have never been one for waving the flag or saying what a fantastic job we are doing, but nevertheless maybe some branding method which stops far short of looking like overt nationalism but gives a recognition of the good work the Department is doing is required. I get from what you are saying that that is the direction in which the Department is moving. It is almost as if we are scared to talk about the excellent work that is going on in those countries themselves falling just about short of being ashamed that we need to do it.
Mr Alexander: I would be very interested if
the Committee made recommendations in terms of the Aid under Pressure Inquiry
on exactly this issue because I am giving it thought at the moment. To be perfectly honest, there has been
something of an orthodoxy that said because DFID since 1997 pursued unashamedly
a strategy of country-led development and gained legitimacy and credibility
both in partner countries and with people who were aware of the Department
because of the relentless focus not on waving the flag but on doing what was
judged right in the circumstances that it was sustainable for people not to be
aware of the work of the Department.
Personally, I do not think it is.
I think if we are asking the British people to fund year-on-year rises
in the budget of the Department for International Department we do need to work
harder to make sure that the people of
Q296 Chairman:
Secretary
of State, this gives us subjects of lively debate when we are pounding on
through the bush or the desert in minibuses, I can tell you. I will give you two anecdotes from our trip
in
Mr Alexander: Yes.
Q297 Chairman: We were kind of expecting you might be getting somewhere.
Mr Alexander: Yes, you can. In that sense I expect that we will be able to move that forward in the immediate months to come, but perhaps the natural opportunity would be the White Paper and that is why if you have thoughts on these issues they would be very timely.
Q298 Andrew Stunell: This is about increasing awareness particularly amongst young people of development issues and obviously global learning is a small but very important part of what needs to be done here. We have taken some evidence about the Department's Community Linkage initiative which suggested to us that it might not be particularly good value for money in the sense that although it is glamorous and high profile there might be better ways of spending the money on lower profile stuff without the foreign and visits and so on, which is maybe even misleading some people about what they are seeing and giving them a not very helpful view of what development issues are and the relationship between ourselves and Third World countries. I would be interested to know how you would like to respond to that, either in detail now or perhaps write to us and give us some more information about the Department's approach.
Mr Alexander: I will be very happy to write to you. I know that there are some who suggest, for example, if you look at our Platform 2 initiative whereby we are taking young people, 18-25, out to work in developing countries for ten weeks and then coming back and engaging in development education, that unless there are reciprocal visits back from young people in developing countries then we will inevitably create an expectation of some form of dependency and it does not speak to the essential equality that we should be about. I have to say, with respect, that I take a different view. If we are growing a cohort of young people here in the United Kingdom who have themselves experienced doing worthwhile work in developing countries, have met people of their own age and stage with whom they can engage and learn in developing countries and then come back and share those stories and those experiences that will be a material and significant contribution to exactly the kind of consensus that I hope we are all united and wanting to build amongst the British people that this is actually a sensible thing to do. Similarly, when VSO, amongst others, approached me and said one of the reasons that public service workers were considering not taking up the opportunity to work in developing countries was because of concerns about their pension contributions while they were doing that voluntary work overseas, I worked with the DCSF and the Department of Health to make sure that if you are a teacher, a nurse or doctor, together we can match the pension contributions that otherwise would be made while you were working here in the UK. Again, that is because they have got valuable and important work to do when they are overseas. It is also because I want local GPs in communities across the country, nurses, doctors, teachers and others, to be able to come back and share those experiences. In that sense I will look with care at whatever observations you have in terms of value for money in relation to the specific programme that you mentioned, but I make no apology for the fact that we are looking at ways that we can both allow people to do worthwhile work in developing countries and then come back and engage in describing those experiences when they return.
Q299 Andrew Stunell: So if it is a good project would you consider it expanding to further and higher education as well as to schools?
Mr Alexander: I am not in a position where I am going to give a commitment on a specific project today, but if there are recommendations the Committee would like to make I can give thought to them.
Q300 Chairman: Thank you, Secretary of State. It has been an interesting exchange and it is fair to say that the Committee is certainly committed to ensuring that the public understands and supports the aims and objectives of our development budget, but at times of stress like this it is particularly important that we focus on what it is about. You and your officials have indicated that you will respond to us in writing on some of the issues. Can I point out that on the deadline that effectively we are working to because of your White Paper deadline we are under some tight pressure so if we could have those written responses as quickly as possible it would be very helpful.
Mr Alexander: We will do it very quickly.
Chairman: Thank you, all three of you, very much indeed.