UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 511-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INTERNATIONAL DEVELOPMENT COMMITTEE

 

 

URBANISATION AND POVERTY

 

 

Tuesday 12 May 2009

MR PAUL TAYLOR and MR MICHAEL MUTTER

Evidence heard in Public Questions 1 - 45

 

 

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the International Development Committee

on Tuesday 12 May 2009

Members present

Malcolm Bruce, in the Chair

John Battle

Mr Mark Hendrick

Mr Marsha Singh

Andrew Stunell

________________

Witnesses: Mr Paul Taylor, Chief of the Office of the Executive Director, and Mr Michael Mutter, Senior Adviser, Slum Upgrading Facility, UN-Habitat, gave evidence.

Q1 Chairman: Can I say good morning, gentlemen, nice to see you again, on our turf, not yours, this time. Thank you very much for coming to give evidence at the start of this inquiry into poverty and urbanisation. I wonder for the record whether you would introduce yourselves.

Mr Taylor: My name is Paul Taylor. I am Chief of the Office of the Executive Director in UN-Habitat. I have worked for UN-Habitat since 1997.

Mr Mutter: I am Michael Mutter. I am Head of the Slum Upgrading Facility within UN-Habitat. I am currently undertaking a three-year pilot programme. I am based in the Nairobi headquarters of UN-Habitat.

Q2 Chairman: Thank you very much for that. We are aware that last year (although, of course, it depends whose figures you take) the world became predominantly urban or whatever, but clearly what that is is a process of growing urbanisation. Obviously, in many cases the conditions in which people are living in an urban environment are very poor and they are in a very high degree of poverty. According to DFID the MDG 7 target to improve the lives of slum dwellers is one of the "least known and least understood" of the targets. Is that your take on that? Do you agree with that, and in the circumstances, given how many people are living in these conditions, why do you think it is given such low priority?

Mr Taylor: I think it is correct to say that it is one of the least known targets. Quite often when you look at reports on the monitoring of the achievement of the MDGs you find the target on the number of slum dwellers not even considered. The reasons for this are extremely complex, but often it is to do with an anti-urban bias within the development programmes of the aid-giving countries. That is something that has deep historical roots in culture and tradition and so on, and it is also a view that is embedded in the philosophies of a lot of developing countries, whereby urban is bad and rural is good, and so, although it is certainly not always the case, the urban challenges which we are facing, and we would argue are one of the most important challenges of the 21st century, tend to get dropped off the agenda.

Q3 Chairman: Obviously, your job is to push them up the agenda. In one sense - I would not say it is controversial but it is a debatable point - the use of the term "slum" seems to have generated some debate in some quarters, saying that it is a pejorative term and it does not give dignity to the people. They have dignity but nevertheless it puts them in a box. Do you have any view about that? Do you think it is an important discussion or not, and would you offer an alternative expression, if that is the case, because clearly "slum" means different things to different people? We have just had a big movie about slums.

Mr Taylor: I can see that Michael is itching to make a comment but I will dive in first. We have deliberately adopted the term "slum" because it is a term that is not ambiguous; it catches people's attention and it accurately reflects the conditions that many poor people live in. Yes, I think you could argue that there are some pejorative elements to it, and I have heard that suggested, but in our view it is an important issue that needs to be addressed and confronted and there should be no space for pulling our punches.

Mr Mutter: Perhaps I can just add that the best way of reasoning the term is to ask the slum dwellers themselves. Largely what we find is that that they are very happy to be called slum dwellers. They are happy to be known as that group of people and a group of people that can themselves strive towards bettering their own conditions. Governments often do not like the term, you are quite right, because of the pejorative nature of it. On the other hand, when trying to measure what this is about, we are talking about very specific deprivations. We have a formula on deprivations - on durability, overcrowding, access to services, which are measurable on a global basis country by country, and from that point of view it has turned out to be very useful terminology. Coming back to the target, the other issue is that it has got a different date for a start. It has got 2020 on it rather than 2015 which the other targets have. This largely came out of the last of the global conferences that led to many of the MDGs. The Istanbul conference in 1996, being relatively late in that sequence, for quite a while did not have a very specific outcome target, and this one was put together jointly by UN-Habitat, Cities Alliance and others just before the 2000 global summit that determined MDGs.

Q4 Chairman: So that is how it came about. The target aimed at is "by 2020, to have achieved a significant improvement in the lives of at least 100 million slum dwellers". First of all, if it was your target, what have you done to raise the profile? We will talk a bit more about that a bit later on, but what is the current financing gap on that? In other words, how much do you think it will take to deliver that target before we discuss its relative achievability? Do you have sufficient engagement with donors to match your requirements?

Mr Taylor: The first point we would make is that the target is the responsibility of countries. Those were the commitments under the Millennium Development Goals. We assist countries butt it is countries which have the responsibility to achieve those targets.

Q5 Chairman: Presumably you have to have enough countries with targets that add up to 100 million?

Mr Taylor: What we would see is that that target has been met already. We think it was actually a relatively modest target.

Q6 Chairman: So when you say that that has been met already what you mean is that you have enough governments that have set a target of achieving the improvement of slum dwellers' lives by 2020 to add up to 100 million or more?

Mr Taylor: No; I would go further than that, that governments have already achieved the target of 100 million. The latest figures suggest that India and China alone have done enough to improve the lives of their slum dwellers to have met that target without the support of any other governments throughout the world.

Q7 Chairman: I think some of my colleagues might want to explore that in subsequent questions.

Mr Taylor: Sure, but the point I would also make is that the rate of slum formation is much greater than 100 million, so you may have achieved the target as presented but that does not mean to say that in aggregate terms you have reduced the number of slums.

Q8 Chairman: I think we recognise that. Does your colleague wish to add anything?

Mr Mutter: Yes, that is absolutely right. Working on the detail with governments is far more interesting than the broad numbers of the global position. We estimate that it is probably more like a billion slum dwellers, ten times the target, that would need addressing. An even greater challenge is preventing slum formation. Slums come and go. It is very difficult to measure. You would have to revise your figures daily at least in order to have accurate figures. It is more the kind of approach that governments are taking to low-income housing, very specifically land issues. Slums come about through lack of alternative opportunity. Most of them are there because they are a response by hard-working individuals to be closer to their areas of work. They take whatever opportunities they can in developing a place to live which is convenient for them largely to walk to work. We have got a lot of people in those conditions, but what I would say is that in dealing with the governments of each country there is still a lack of recognition of the scale of the event that needs to be addressed in terms of provision of adequate shelter for these people and it is largely a land issue. Land use planning is not what it used to be, shall we say. The numbers are overtaking whatever governments are doing currently, and that is the reason for slum formation and that is what is not being adequately addressed.

Q9 Mr Hendrick: Clearly, the economic downturn at the moment will have had a big impact and many of the slums have developed, for example, in China from migrant workers who have come from other parts of China to the cities and were probably in a job. Now many of them will find themselves out of a job so they will not only be in slums; they will also be unemployed in slums and many of them will have to go back to the provinces. We are talking about improving the lives of slum dwellers. Is it just about improving where they actually live or raising their incomes and improving their standard of living and they work in the cities or whether they are in the provinces which they came from?

Mr Mutter: It is complex. You could take any of those approaches or all of them. Certainly, the normal situation before the downturn was that there was a relentless rise in numbers of people in some way or other, having gained a livelihood position within a city, needing somewhere to live and finding options of where to live difficult. What we would say is that there is a definite link to shelter and housing provision and the inadequacies of housing provision, but, that said, many of the slum dwellers themselves are really looking for just a very modest improvement in their conditions, not a stereotyped new house for everyone but certainly the opportunity to be near areas of work. Yes, areas of work are fluctuating now, as we know, but very often it is just land and the provision of some basic infrastructure that is what they are looking for. The modesty of their shelters is something they are prepared to put up with; their main criterion is the rental cost or the cost of the structure that they can provide for themselves. So long as that is kept low they are happy. If, on the other hand, slums are replaced by relatively up-market housing relative to their existing conditions, they face an even bigger problem of not being able to afford to live in that place, so all of the types of living accommodation need addressing in some form or another.

Q10 John Battle: Could I ask about housing provision and housing finance, and thank you for coming and welcome to what I think is the most neglected part of the UN's work, which is UN-Habitat's? I would just say that the report you did on slums, the brown-covered document, was ahead of the game because we are only just waking up to the impact of urbanisation and the point that you made earlier on about how there is an anti-urban bias and a romancing of "rural" by the whole world's economic thinking, in my view. Very briefly, my experience of slums was in Korea when the Olympics were on and people were evicted from their houses and they were promised they could have the Olympic village afterwards but they had nowhere to live in the meantime so they parked outside the town hall and moved around the city for nearly five months; I was there with them, and their main demand was, "Where will we live?" I spent some time in São Paolo living under a motorway bridge where our water came from an open sewer, the most dangerous conditions I have ever lived in in my life, and our campaign there was for water. I have also been to Khayelitsha where the biggest campaign was for electricity. Why do I mention them? Because in development we talk about the provision of water, schools and clinics but we do not talk about the provision of houses. I just wonder how much the focus is shifting onto housing provision and housing finance. You say in your recent UN-Habitat paper that you are concerned about the lack of donor finance to the housing sector in particular. I do not think it is unique to the developing world or unique to here. We talk about the shortage of council housing in my neighbourhood but we have not got a strategy in place to provide those houses yet, so it is an international problem. About that finance - what is the extent of the crisis for housing finance if there is this financial crisis that Mark referred to and that the Chairman referred to? The situation must be getting worse. People do have to pay some rent and in the meantime we are putting some water in A/B, we are putting some electricity in, we are suggesting that people move somewhere else, but what about addressing the issue of urban development and planning and land use? Is housing becoming a focal part of that discussion yet?

Mr Mutter: Yes, it is, thank goodness. What is interesting about the current financial crisis is that (thank goodness) it is slow to reach developing countries. The assumption that it will have had an impact, for example, on liquidity in banks such that they would find themselves constrained to offer loans as part of a low income housing strategy is not the case, not yet anyway. Certainly, with the Slum Upgrading Facility in the part of UN-Habitat that I run, for example, in Sri Lanka and in Indonesia, we have been able to secure loans as part of the overall slum upgrading process from the commercial banks, Hatton National Bank, for example, in Sri Lanka, Bukopin Bank in Indonesia, have both been able to provide loans as expected within the structure of our methodology for the Slum Upgrading Facility projects that are running in each of those countries. Doubtless, as your colleague mentioned earlier, the impact will be more on the general economy as a result of trade imbalances, et cetera, but for housing finance what we are finding is that there is a great deal of interest by governments, by local governments and by the commercial banks themselves in that there is a huge market that they have not yet tapped into because they are afraid of moving into that particular type of market, and what we are able to do with our work is provide more of the kind of assurance and comfort factors, to put it in the terms that the banks use, which are very similar to the friendly societies' work in this country 100 years ago. There is an emphasis on membership with savings as a starting point. There is a demonstration not only of good faith in the process by the slum dwellers, but also it is very straightforward to a banker. If they can see regular payments going into a savings scheme they can see that there is an affordability to at least part of the process. I do not pretend it can meet all the financing but it can go a long way, provided that there is other financing coming into the process as well.

Q11 John Battle: And that other financing might include public investment in housing itself. In Britain 18 per cent is private rented and has been since 1850. It is still 18 per cent private rented and the variation between owner-occupation and public renting, whether it is housing association or council in Britain is that it is now 80 per cent private ownership and there is talk about building publicly-provided houses to rent again. Where are we up to in terms of pushing for public investment in housing or do developing countries themselves give priority to public investment in pro-poor housing? We call it social housing for some reason but you can see where I am coming from. I know you said people live in modest conditions, but I am talking about providing more units in the appropriate places, maybe near to work or not, on the forecourt of a town hall, for example, where people may be squatting.

Mr Taylor: I do not think it is the case that we are proposing a greater share from Habitat in terms of good practice. We are not generally speaking pressing for a greater share of public expenditure in the built form, particularly for less developed countries. We would argue that the main priorities are land and infrastructure. It varies a little bit according to climatic conditions, of course, but generally speaking in hot countries the built form is less important; it is about access to services and freedom from fear of eviction which are the most important thing for the worst off sectors. I would add two things to this. First of all, in countries that have rapidly growing incomes, such as China, there is an increased capacity to provide the built form, social housing, if you like. That is not an opportunity that is available for the poorer countries. The government budget provision is just not there. The second point, and this is what Michael has been working on particularly, is that there is enormous scope for mobilising domestic finance (private finance we are talking about here) both from slum dwellers themselves but also from the local markets. Michael can give you some figures on that. Generally speaking, we see the role of government as an enabler rather than as a direct provider. There are questions of balance, there are question of focus, there are contextual questions, but as a general argument that would be the way we would go.

Q12 John Battle: What would you like to see donors doing in supporting housing? I would be shouting at them, "Take housing seriously", but what would you want from the donors and what would you expect the donors to be focusing on?

Mr Mutter: I would say that there are very good examples, such as the community-led infrastructure finance facility, which is through the Cities Alliance and Homeless International in the UK and the Slum Upgrading Facility, and also we have in UN-Habitat our experimental reimbursable seeding operations programme. Each of those is already established. What I think is always difficult for donors, but it is where perhaps they should be concentrating, is looking at the longer term and providing the degree of continuity that some of the existing initiatives have already paved the way for and say, "Okay, now we need ten years of money for this kind of activity". For example, our programme does not use money directly in construction. It does not use money directly in each of the countries. What it does do, through what we call local finance facilities, which we set up as hand-holding operations locally where the banks and the government and local government and the slum dwellers can be represented, is rather more the kind of guarantee facilities that we need prime capital for that are then able to assure local operations with the programmes slum dwellers want to pursue and for that to have, as I say, a lifespan of at least ten years so that the initiatives can gain ground. It takes an extremely long time locally to put a slum upgrading project together. You have to pull in so many different local agencies that time is the most precious resource that they are faced with as a problem, so for donors to be able to give a degree of assurance over a longer period of time would be really useful in these circumstances.

Mr Taylor: Could I take up a point that the Chairman made earlier about why is urban not popular for donors? I think generally speaking it is because it is complicated, there are long lead times and it takes a long time to show results because you have to play with so many factors in order to get a result.

Q13 John Battle: A rural clinic is easy?

Mr Taylor: Yes, whereas the pressure on donors is always to show results - "What have you developed on the ground? What can we see that is tangible?" There is very little patience when you say, "It is a bit difficult, it is a bit complicated, it is not straightforward, there are political factors", and so on. That is why I think it is fair to say that a lot of donors stay away. You asked me what donors can do. We are finding a lot of difficulty in persuading donors to address our innovative approaches to low income housing finance. We were subjected at our recent governing councils to extensive grilling, if I can put it that way, for even having the temerity to propose that we should be involved in this area. The question was posed, "Is it not rather the role of the international financial institutions to do this sort of work?" We said, "Yes, but they are not doing it. It is just not happening". The bottom 40 per cent of housing is a sort of no-go area for finance, generally speaking, but we did not adopt the approach, "Then let us ask for money for Habitat to retail into the low income housing sector". We said, "What we want to do is look at down-marketing of existing financial instruments", and I think the credit crunch has put paid to one or two of those. For example, we tried to look at securitisation models in Nicaragua with Merrill Lynch. That is off the table now, but there are various other things we can do. The point that I would like to make is that there are excellent examples of good experience which we then need to upscale and donor support for that is always useful through such things as guarantees, but, secondly, we need to innovate in this sector, and there is very little donor support for this.

Mr Mutter: Could I just mention one programme that DFID is bravely embracing, and that is in Bangladesh. UN-Habitat with UNDP and UNDP Finance between 2000 and 2007 undertook a programme in 11 towns in Bangladesh and this showed very promising results, the numbers of families that it addressed and the way in which it was community driven as an outcome. DFID Bangladesh looked at this programme, did a poverty impact assessment of it, liked the results and has boldly committed £60 million to an upscaling of that programme to 30 towns on the same model as developed locally by UN-Habitat and through UNDP support and with the local government engineering department in Bangladesh, a fairly authoritarian group of people, which at least achieved results. The very basis of it is the community development committees that are set up in each case. In the first round there were something like 650 of these local community development committees, and the outcome is very much the infrastructure side of things - pit latrines, water supply, paved roads - that the communities themselves have driven, and there are something like 1,500 community contracts that were let in that first phase. The second phase will upscale this but the real bonus of that kind of approach is that the government could see the effectiveness of the first phase, so that was the innovation phase, as Paul was mentioning, but these then do need the support of donors to take them to the upscaling level.

Q14 Mr Singh: You have just received a record increase in your budget, about 30 per cent. How has that come about? Does that reflect a growing interest among donors in urban poverty and what are your priorities in terms of spending that increase?

Mr Taylor: First of all, let me clarify this increase in the budget of UN-Habitat. We have been seeing biennial on biennial increases in our budget since 2000. Just to give one indicator, for our core budget, which has the voluntary contributions from donors, we have seen a six-fold increase since the year 2000 from a very low base. However, our budget is not money we are actually presented with at the beginning of the financial cycle. It is an aspirational budget in the sense that what we then have to do is collect that money over the two-year cycle of the budget. In all previous years we have had between 20 and 30 per cent increases in our budget and we have always managed to collect that additional money. We have hit the button almost every time. One of the reasons we are relatively generous with our budget is that, unless we include our most optimistic projections, if we collect money over and above that we are not allowed to spend it because it is not included in our budget estimations. It is therefore prudent on our part to allow for what we might see as being the best possible scenario, and if we do not achieve that best possible scenario we have prioritised our work programme in such a way that we can downscale or indeed, if the worst comes to the worst, not do particular items. I would say that the vast majority of the money that we get in UN-Habitat is not free money in the sense that we can use it for whatever we like. It is generally speaking earmarked funding. DFID will say, "We like what you do in Bangladesh", for the sake of argument, "and we will fund that and you can only use it for that", so although we have prioritised our work programme it does not necessarily follow that donors will respect our priorities. They tend to follow their own individual priorities when they give money. In terms of what we propose to do, we have undergone a major reform exercise within the agency where we have asked ourselves what we think are the tough questions about where we want to be in the future, and we have tried to address the problem that I referred to before which is that everybody wants to say, "Show us your results. What have you done? We do not want to hear about your activities, we do not want to hear about the conferences you have held. We just want to hear about what you have done on the ground", so what we have tried to do is formulate the things we do in such a way that they can be addressed as tangible outcomes, things which people feel to be useful. The area that we will concentrate on first of all is advocacy to address the issue of the low priority that is given to urban in both government and donor development programmes. The second area we will look at is participatory planning and management for governance, and I would particularly want to mention planning here because this is an area where I think major innovation is taking place. The third area is pro-poor land and housing. We believe that land is one of the critical levers to secure improved housing. The fourth area is environmentally sound basic infrastructure and services - water supply and sanitation and so on, but with an environmental climate change element to that, and we can come back to that later. Fifth is housing finance, and our last focus area is excellence in management. That is our aim, to get more effective and more efficient processes within the agency and to have measurable targets for achieving such. Those will be our priorities over the next biennial work programme period.

Q15 Mr Singh: Are you satisfied with those current budgetary arrangements where you are not quite sure how much you are going to get?

Mr Taylor: We would like to press for increased flexibility in order to be given more non-earmarked funds so that we can meet the priorities of the work programme as stated by our governing council. Quite often, because we get individual donor priorities that are different from the overall priorities of our governing council, we end up funding things that are lower down our priority list than has been agreed by our working body.

Q16 Mr Singh: And who are the major donors and where does DFID come in?

Mr Taylor: Our major donors at the moment for our core funding are Norway, Sweden, the Netherlands, Spain. Those are the top-ranking ones. Coming further down the list, number eight is the UK, which gives about £1 million in core funding. It was at one stage, four or five years ago, one of the major donors, I think it was even number one at one point for UN-Habitat, but it has slipped down the list since then. Having said that, in terms of funding for a lot of our activities in the field, the UK is a very important partner. In 2007, for example, in terms of money going directly to Habitat, it gave, if I recall correctly, something like $12 million. This was mainly to support humanitarian operations in which we are engaged in places like Pakistan, Afghanistan, Sudan, Myanmar, those are some of the major places, and on top of that we get money which is not reflected in our budget because it is sourced through other donors. For example, Michael mentioned Bangladesh. That money goes through UNDP before it gets to Habitat and that is not reflected in the contributions we get from DFID. Likewise, some of the money you get for the upgrading facility from DFID is sourced through an entity called the Cities Alliance, and that also is not reflected directly in our budgetary receipts.

Q17 Mr Singh: Is DFID quite reliable in terms of giving you the money it says it will give you?

Mr Taylor: That is a question you might want to put to DFID. Let me say that we have not received last year's contribution from DFID. Of course, we hope to receive it very shortly.

Q18 Mr Singh: I hope you do. Are there any specific areas in which you would like to see DFID develop its work with UN-Habitat?

Mr Taylor: Yes. One of the things I would say is that we think DFID and the UK generally punch below their weight in this particular area. It is a point I was discussing with Michael yesterday. The UK has, particularly in terms of its university base, a massive comparative advantage over other donor governments. It has a large number of institutions that have a worldwide reputation for excellence, yet what we are seeing is that the support they have historically received from the UK Government has been dropping away over recent years. We think there is a lot of scope to use the UK resource base in a more proactive fashion than we are doing at the moment. As for specific areas where we think DFID have expertise, I think the housing area within which Michael principally operates is one area where there is a lot of background, not only from universities but also from NGOs, and it is an area where we would possibly like to do more. Across the board the UK has excellent experience in urban development, virtually without parallel amongst other nations, so over almost the whole range of our work programme we can see areas where there could be additional and specific support, not just financial but also support in expertise, from the UK.

Q19 Andrew Stunell: It is interesting you have described DFID as punching below its weight in this area when we are rather used to people telling us that DFID punches above its weight, so I wonder if we could explore that a bit, perhaps by reference to the World Urban Forum, and I think there is a meeting coming along in Rio de Janeiro in March next year. What sort of co-operation are you getting from DFID? Do you think their contribution to that is punching above their weight or below their weight? What would you say about the World Urban Forum itself as well?

Mr Taylor: There has been a series of four World Urban Forums up to now. I think probably the high point of DFID's presence was at the Vancouver World Urban Forum where I think it was very prominent in terms of making input to the discussions and debates that took place there. At the one in Nanjing I would say the UK was less prominent, particularly from the Government side, in terms of involvement in the debates that took place there. I would argue that the debates that take place at the World Urban Forum are really pivotal in influencing the directions which practitioners - the UN, governments - go in the future in the area of urban development and not to be a part of those debates means that you are some way not involving yourself in what I would say is the quite profound intellectual discourse that takes place there. We do not know what DFID's involvement will be at the next World Urban Forum, which will be in Rio in March of next year. We obviously look forward to a strong presence there.

Q20 Andrew Stunell: Specifically what do you want them to be contributing in terms of ideas, manpower, person power, whatever? Sending a few extra people on aeroplanes is not a solution but what exactly are you looking for?

Mr Taylor: It is always good to get financial support because it is pretty much a high-wire act sometimes. We always rely on quite a lot of money from the host government; that is a significant criterion for how we select the venue for the World Urban Forum. Typically speaking, we often have difficulties in getting sufficient finance to get people to the World Urban Forum from less developed countries. It is expensive to get people there. I would have to say that the Scandinavians in particular have always proven to be generous in that particular area, but I would say also that the involvement in the discussion that takes place there to put forward positions, to argue for them, to debate with people who disagree with you or have different viewpoints, is really important. The World Urban Forum is not a forum at which we present UN-Habitat propaganda and try to sell it. It is a forum at which we open up a space for everybody to make a contribution and have an opportunity to influence the global context of debate but also specifically what Habitat does in future. Finally, it is the opportunity to make important contacts. What we have seen is that many initiatives have come about and resulted from what people meeting together at the World Urban Forum agree to collaborate on and move on in the future to do practical things about on the ground, and that is something we feel is extremely valuable.

Q21 John Battle: Can I say I welcome that? I think it was at the third one that there was a suggestion that we build for the World Urban Forum at the local level, so there is a series of regional urban forums and we build, like future cities in Britain, on the urban councils and they have workshops in between the years and that is fed through with delegations rather than it just depending on one minister going. Has UN-Habitat been able to take that forward as a process for broadening the forum and building it up from the base?

Mr Taylor: We are a very small agency and, frankly, we could not cope with too many more conferences of that nature even on a regional basis. What we do though is that on a political level we convene regional conferences of ministers who have in their portfolio responsibilities for urban development. We have one for Asia, we have one for Africa, we have one for Latin America, and these make a powerful contribution, but generally speaking those meetings do not have the financing requirements on the scale that we have for the World Urban Forum, which is pretty onerous and in organisational terms is pretty onerous as well. What we do also though is that we are trying to regionalise in the sense that you may have seen in the Habitat State of the World Cities report, which tries to set out some of the key issues of the urban agenda. What we are increasingly doing is producing regional forums on that State of the World Cities report so that issues specific to, say, Africa or Asia or Latin America are represented in those reports and then we can make certain those issues do not drop off the agenda at the annual World Urban Forum, because the State of the World Cities report, the global report, is always released at the World Urban Forum. We are trying to create a situation of connectedness.

Mr Mutter: In relation to your question on what kinds of subjects should the UK and DFID in particular address, I would suggest that housing and finance, especially the commercial finance aspect, would be something that would be really useful to have as a backing for the Rio conference, especially in terms of galvanising the international commercial banks, or, shall we say, the ones that are still surviving by March next year? For example, HSBC has been remarkable in its ability at the local level to invest in providing commercial loans into the kinds of housing schemes that we are promoting, firstly in Sri Lanka but in other parts of the world as well. There is a lot of goodwill backed up there in the finance houses that I think is currently untapped and unheard of by the national governments who may be attending the World Urban Forum.

Q22 Andrew Stunell: That is interesting. We will take that further forward perhaps. Can I turn to the Cities Alliance and "Cities Without Slums" agenda. Earlier on you said that "slum" was unambiguous and that was one of its advantages, but it is also an unachievable slogan, is it not, to get rid of slums? We have cut away 100 million, we have achieved the target of 2020, but we have still got an extra 400 million people in slums, so are we not chasing our own tails here? What are we actually trying to do and can you have a city without slums?

Mr Taylor: We would like to pause this term "Cities Without Slums" because generally speaking what has happened in the past, particularly but not exclusively in Africa, is to try and play catch-up. What has happened is that the slum population has increased faster than action (if indeed there is any action) to address slum formation. What we would argue is that cities have to get ahead of the game, that what they have to do is make sure that there is sufficient infrastructure services, housing blocks, available to cater for projected increases in low income housing populations. You might say that sounds pretty Utopian. It is not. One of the things that really impresses you if you go to China is the way they use their planning process to think ahead of the formation of slums and other kinds of urban development, and that is not only in terms of physically making land available but also linking the planned allocation of land with investment in services and budgeting for that investment in services. In our view "Cities Without Slums" does not mean eradication; I do not think anybody seriously thinks we are proposing that, nor does it necessarily mean that you know that within a short timescale we can get rid of all the slums in the world, rather that we get governments, local authorities and other players to start thinking about the ways in which they can proactively plan for their low income housing populations to try and make certain that you are not the victim of circumstances but rather that you are ahead of the game.

Q23 Mr Hendrick: Is it something they are trying to do with birth control? The elephant in the room on this subject is whether or not you can get rid of the population. As fast as people want to build property, if people are having children even quicker, as Andrew puts it, you are going to be chasing your tail. You present China as an example but it is not a typical example, is it?

Mr Taylor: Certainly that has been one element of their success. There is also a very interesting phenomenon which is emerging in China which reflects the points which you have made. In a number of cases we are seeing declining cities, where cities are not growing but reducing in the number of their inhabitants. That is partly a reflection of the greying of the population, but it is also a matter of whether you see people as a resource or a problem. I think there is an increasing inclination, if only in economic terms, to look at a relatively young population as something which is at least of economic advantage, certainly when you are comparing, let us say, the economic prospects for India as compared to China. The relatively large number of people in the younger age cohorts seems to suggest that you will have higher levels of economic activity, and so in many ways the slum issues are also dependent, obviously, on economic productivity and economic growth. Generally speaking, the younger the age profile of your population the more potential you have for economic growth. I am not saying in terms of aggregate numbers it makes solving of the issue of the backlog of slums a lot easier, but what it does do is give an economic context within which things may not be as difficult as they might otherwise be.

Mr Hendrick: It does not make it easier; it actually makes it worse, because if you are going to get huge growth in population you are going to get growth in slums.

Q24 Andrew Stunell: Can I just bring us back to the discussion before? If the target to get rid of slums is in the hands of national governments the obvious way of getting rid of slums is to send some bulldozers in. The less obvious and far more expensive way is to put in infrastructure on plots of land so that the next wave of people will have un-slum-like conditions to move onto.

Mr Taylor: Correct.

Q25 Andrew Stunell: There is a major disincentive for a national government to go down the second route, particularly if in any case its main policy aim in this respect is to retain its population in the rural areas. If it makes it really comfortable to flock to the big cities it will actually accelerate a problem that it sees as being a problem. That brings back this rural fashionable/urban unfashionable discussion which we did not quite get to before. Do you have a view about whether urbanisation is collectively a good thing or is it something which national governments are right to be working to resist? Should national governments be focusing on carrots or sticks to solve the slum problem?

Mr Taylor: You have set a lot of hares running there.

Q26 Andrew Stunell: I am a novice.

Mr Taylor: Let us see if we can track a few of them down. We are unambiguous that urbanisation is a good thing. What we see is that urbanisation has always been the motor of national development. We do not see any good examples of models which are rurally based. Secondly, it is inevitable. You talked about using forced evictions to send people back to the countryside, just supposing morally and ethically you could bite on that particular bullet. It does not work. We can take some obvious examples. There is the famous case in Zimbabwe, for example, where 800,000 low income residents had their houses bulldozed in precisely the fashion which you describe and many of them were trucked back to the rural areas. They are now back in the urban areas. This is what happens. You have in Tanzania the famous example in the 1970s of village-isation policies, perhaps a lot more humane than was undertaken in Zimbabwe but also some of it had a bit of a prod behind it as well. That completely ended in failure. Even the worst-performing cities, and you can pick whichever city you care to name, and I am talking here particularly about primate cities, the large cities; but we can create even better arguments for intermediate cities, even some of the most difficult and dysfunctional cities contribute a higher share of gross domestic product per capita than do rural areas. Let us take Lagos, an extremely difficult city. It contains about one third of the population of Nigeria. It produces about 60 per cent of GDP. You can find countless examples like that from around the world, so we would regard urbanisation as both inevitable and desirable. The trick is to make certain that the form of urbanisation you get is as successful as it can be. There can be many dysfunctionalities, there can be many people who are excluded from the development process in cities, either by accident or design, in most cases a combination of both, who cannot contribute as fully to city life as they otherwise could because there is a philosophy around if you have a world-class city that the poor have no place in it, that they should be hidden away, they should be excluded, that indeed, if I were to exaggerate somewhat but not much, that exclusion is a price worth paying for economic development. Our research, as you will see in the latest State of the World Cities report, shows quite conclusively that cities that have higher degrees of equality are also amongst those that are more economically efficient, so (a) cities, even if badly run, make a disproportionate contribution to the share of national income, and (b) they can even do better if they are equitable and well run and then they can do a lot better than those that are left to their own devices. Yes, we are unambiguous about it. I will make one final point here, if I am not going on too long: it is very difficult to get statistics on forced evictions. Anticipating a question on that I had a bit of a root around with our people in Nairobi on this and they said it is very difficult to get numbers. In the last period on which we are able to get some sort of numbers was the period 2000-02, there were something like something over six million forced evictions around the world, as best we could tell. In the preceding two year period there were about four million forced evictions. These are very, very spongy figures but they are the best we could get. On our not-evidence-based assertion, but in terms of our witnessing of forced eviction events around the world, we would say that forced evictions are increasing and often used as a sort of alternative method of town planning. Often, low-income populations, in order to have access to employment opportunities, are located on extremely valuable areas of land close to the centres of town. These areas are often coveted by real estate developers who will then get into league with government and arrange for those residents to be evicted, often under the harshest possible circumstances. So we argue very strongly against forced evictions. We are not saying that evictions can never be done; often for very good public purposes you have displaced people, but it should be done with due process and there are international standards which prescribe what the due processes are. Unfortunately, at the moment, we see many cases where forced evictions are on the increase.

Mr Mutter: Could I just add a little bit about the processes of urbanisation and, also, population expansion? Most countries that urbanised some time ago display higher GDP per capita levels, and with that rise in affluence there is a tailing off of family size, generally speaking. So there is a pattern that you could say is the good side of urbanisation, which is that given good investments in the urban structure people tend to have a higher income level, GDP per capita. The UK, for example, with sort of 90 per cent urban living, is an example, but it is true that most developed countries are extremely urban by comparison to poor countries. So there is a growth in per capita income levels with structured urbanisation, and there is a tailing off of growth of population as a whole, as a result of that. That is the model we are trying to encourage. I might just cite the case of Singapore. I know people did not have an option to go and live in the countryside, because there was not any, but they structured their investments in the standards of urban development in a very proactive way. I know it seems, maybe, difficult to remember, but in the 1950s Singapore was riven with slums and the government took a very bold step. They tried various models but the model they came down to was to say, okay, the private sector should build all the new housing but the government would pay the 40 per cent deposit on anyone relocating from the slum to a high-rise apartment block. People were very sceptical that this could ever work; people said they did not want to live in the air and they preferred their little shack with their boat and all the rest of it, but in the end people complained if they were not given an opportunity. That model has, by and large, worked and it is private sector-driven, but with a very decent slug of government money going in, but into the model of private development housing but for the lowest income groups.

Mr Taylor: I think, on the point of urbanisation, we would tend to argue that there is quite a clear mathematical relationship between the rate of urbanisation and GDP. In terms of examples, we would cite the fact that China, once again, embraced urbanisation very early, and we can see a clear relationship between economic growth in China and the rate of urbanisation. Those countries that are in urbanisation denial tend to perform the worst in terms of economic growth.

Q27 Chairman: You have made that point a number of times, and Mark Hendrick has asked you the population questions. When you put the two together, you have got people living in urban "slums" but they are also multiplying. Michael said that as living standards rise family size tends to get smaller but your own figures suggest that the growth of urban slums is going to be natural generation within those slums. What is your policy on trying to manage that?

Mr Taylor: First of all, I would say, in overall terms, the rate of urbanisation is slowing globally. It is still happening and the only area of the world where you are seeing rates of urbanisation decreasing, I think, are in Western Europe. The rate of increase is slowing down. I think the second point we would say is that what you, essentially, have to do, as we have been arguing already, is to release a variety of resources into the housing market which, at the moment, are not being fully exploited. Michael has talked about the availability of domestic finance. We find that in many countries there are surprising amounts of domestic finance looking for a home (Michael can probably give you better information on that), even in relatively poor countries. Secondly, we find that there are enormous opportunities for generating funding from savings of slum dwellers themselves, and there are many well-documented examples of this, where slum dwellers put away small amounts of money on a periodic basis and this proves enough - and they do it through savings organisations which are run by themselves - to generate capital for investment in housing. So, yes, you are seeing increasing population but we also believe that there are under-utilised resources which can be unlocked through innovative schemes of housing finance. So we do not believe that it is, by any means, a hopeless situation.

Q28 Chairman: You do not have a population policy; to some extent you think it will take care of itself?

Mr Mutter: There are whole reasons for urbanisation taking place. As towns expand they engulf villages that are around them, and those people become part of the urban scheme. Nairobi Metropolitan, for example, which has just been announced, will engulf fair-sized towns in a radius of about 50 to 80 kilometres from the current centre. So that will become a new city of 10, 15 or 20 million people in due course. Hopefully, it will be properly planned, the housing areas will be earmarked and investment will be made in those kinds of provisions and there will not be an expansion of the slum areas. However, even in rural areas, as happened in Europe and the UK in particular, villages grow until they take on urban characteristics. So, without moving, people become more urban than they were previously. Villages of 5,000 people, for example, become urban centres with the provision of schools and things like that. Just a quick word on reasons for people moving. Education has been a huge driver for rural people to gain access to education for their children. They may be uneducated themselves. We saw this very distinctly in South Africa. Eastern Cape was a predominantly rural region where, by the time the school was due to be brought to a rural population the village, had already gone; they had gone to Cape Town; they had gone to Khayelitsha to find education opportunities, which they could only find by moving to an urban area. I would say there is a cut-off point below which you cannot provide the kind of provision urban areas offer in rural areas. They can be made better but only up to a certain extent. Eventually, the natural tendency of the human population throughout the world is to urbanise.

Q29 Andrew Stunell: You have opened up an aspect of this which I was not fully familiar with at all. Are you saying that the majority of developing countries' governments are pro-urbanisation? I get a very different picture. I just wondered whether there is not actually a major policy gap between what you are trying to achieve at an international level, facilitating national governments carrying out a policy which actually they completely and fundamentally disagree with. Is there not a rather significant disconnect there?

Mr Taylor: I think it is a reasonable comment that you are making, but I think the situation is changing. At the beginning of my time in UN-Habitat, the argument of many developing country governments was: "Urbanisation - bad; rural - good; people staying in rural areas, our policies ought to be to keep them there". Now that is still heard but it is not heard quite so commonly, I would say. We have it as our mandate from our governing council to actually promote the cause of urbanisation. Nobody at our governing council, which also includes developing countries, says: "No, you should not be doing this". What we are saying is that unless you address the urban problems that are being faced at the moment there are greater problems in store in the future, in terms of social consequence, social unrest, urban violence, in terms of increased forced migration, in terms of conflict over land and in terms of increased numbers of deaths from natural catastrophes. So there are things that are in the pipeline. I think governments now are less in denial than they were. I think that is, in part, a consequence of the arguments that have been presented by UN-Habitat over the years.

Q30 John Battle: I want to follow up the Chairman's question and put it another way. I am passionate about urbanisation - I am an urban-addict - and I love the city of Leeds, where I live, but are there structural limits to mega-cities? Why I ask that is that I can see that if a city extends - in the 1500s Hounslow was a village miles away and it is now part of the conglomeration of a huge urban area. If you get people coming in informally to a city centre - let us call it that - and so you have mega-cities of more than one million people, which my own city is now, do you have structural limits, particularly in relation to, say, water and transport? What I found was the sewage system will not sustain that number of people and, also, people cannot get in and out because the roads and transport systems get clogged up. When the place where I was staying was cleared out and we were given land at the far end of Sao Paulo, it took three-and-a-half hours by bus to get back into the place of work in a morning and back out at night, and men and women never saw their children in daylight. So are there structural limits to going into a city, and are you tackling that issue?

Mr Taylor: Yes, what we are seeing is that there are natural limits to growth of mega-cities. In fact, we tend to see too much concentration in international comment on mega-cities. In fact, 50 per cent of the worlds' urban population lives in urban centres of 500,000 people or less (if I recall my statistics correctly), and it is around about 10 per cent that live in mega-cities. So we can get the issue of mega-cities out of proportion. The second thing is that we are seeing that there are natural limits to growth, particularly in badly planned and badly integrated mega-cities, which is leading some of those mega-cities - even some of the most famous ones - to actually lose population to intermediate-sized cities; places like Mexico City, La Paz and Manila. They are experiencing this. What we would say is that any sensible government would put as much emphasis on the development of its intermediate cities as it would on its mega-cities and, also, to meet the objectives which Mr Stunell referred to, in terms of improving the living conditions of the rural population. Cities - and we use the American term "cities" but that refers to all human settlements - exist in order to provide services not only for the residents of those cities themselves but, also, of their surrounding hinterlands. Certain facilities, as Michael was hinting at, can only be provided when there are certain densities of populations and certain economies of scale - higher order facilities, such as tertiary education facilities and higher order medical facilities and so on. If you have a properly developed settlement strategy you can more easily provide these higher order services to rural populations if you can get some reasonable sized settlements developed with reasonable access to rural populations. So we should not overly concentrate on mega-cities. I would also say, in terms of what is actually happening in the cities, probably one of the more significant developments over the last 10 or 15 years has not been the mega-city but the city region. This applies to both developed and to developing countries. Typically, for example, now we would refer to almost the entire south-east of England as a city region that needs to be looked at in an integrated kind of way. The Pearl River Delta that you see in China, the North Eastern Seaboard of the US and the Rand area of South Africa. This is a development that you get in more mature stages of urbanisation in Africa, for example, where urbanisation is still in its first throes - you are seeing the mega-city phenomenon - but the next stage will be the city region. What we are seeing now is that governments, realising, first of all, the economic powerhouse effects of these city regions but, also, some of the inefficiencies that are associated with bad planning for infrastructure, such as you have just mentioned, are also getting more and more involved in decision making at that kind of level. If we were crystal ball gazing for the future, I think, one of the outcomes of the recent credit crisis has been that we might well see a change from the formal, Washington consensus, which is all about shrinking government, to expanding the role of government, and we would anticipate that you will have increasing government involvement and interest in these enormous conglomerations or city regions for developing in various places.

Q31 John Battle: In fact, just this weekend in Leeds, in my city, the Government here in the last Budget a couple of weeks ago declared Leeds the city region for the whole of West Yorkshire. The theme is catching alight, if we cross-reference north and south. Can I ask you about water, really? In a sense, with electricity, you can throw a wire over a cable that is there already and "steal" electricity to get electric, but in terms of water you really have a problem with water and sanitation. You set up a fund, I think, the Water and Sanitation Trust Fund. How is it working out? What is it doing? Surely, land right rows - if you put the water in, authorities, civic or government, resent you sorting the water out because that makes settlements permanent. How are you managing that fund?

Mr Taylor: First of all, we are trying to use the money that we receive, which is relatively modest (I think we have received something like $10 million into the fund so far) to work with international finance institutions, such as, in Africa, the African Development Bank and, in Asia, the Asian Development Bank, to leverage additional funds. So from that $10 million, I think, at the last count, we had leveraged something like around $1 billion for further investment. What we use our money to do is to try and improve the efficiency and effectiveness of the investment financing provided by the international finance institutions by doing a lot of the pre-investment work, by the involvement of communities in the designing of schemes, in terms of capacity building of some of the key players, particularly in water and sanitation utilities, through training and other measures, and also involving communities in the implementation of the schemes as well. We find all these measures taken together can give you overall a better result. Furthermore, what we are doing also is one of the problems we mentioned previously is when you do projects they often tend to remain as projects; that there are boundaries round them and when the project financing is finished it is back to business as usual. So what we have tried to do in our water and sanitation programme is go for regional approaches which involve a number of cities and go across national borders. For example, we have one big programme that is around the Lake Victoria region in East Africa (I forget how many cities it involves now - 15 or 20) and we have another one in the Mekong area, which involves Thailand and Laos. What we are trying to do is ensure that whatever resources that we get in water and sanitation do not go directly into direct provision, but we try and use that money to deliver increased efficiency and effectiveness of the totality of funds that we can make available for any area, and sustainability of the overall investment.

Q32 Mr Hendrick: 70 per cent of people living without improved sanitation and 80 per cent of people living without improved water live in rural areas. DFID is focusing much of its efforts in those rural areas to improve sanitation and water. Given the rate of urbanisation, do you think DFID should shift its priorities?

Mr Mutter: No, would be the immediate answer because three billion people without access to sanitation is just incredible - that we can live in a world with that degree of deprivation. So it needs everything. I think there is still a good case to be made for the provision of water and sanitation measures in rural areas. Very often this, however, does relate to government strategies, in particular, especially with the Water and Sanitation Trust Fund we have set up. The power of convening, as Paul was saying, beyond national boundaries with different governments coming together around, for example, Lake Victoria, where there is a large rural population, is very important in getting the strategy right that then does provide for both the urban and the rural provision. One of the things that we have been able to do with the Water and Sanitation Trust Fund is provide a centre for the global water operators' partnership. This was seen to be something that had never been put together before, and water operators or utility companies that do make these provisions do so opportunistically to where there is the greatest return. To get them to then provide or broaden their scope so that they provide also for the less well developed parts of the geographical spread is very important indeed. Again, if you like, it is the value-added of having a UN department that is able to bring these various disparate groups together.

Mr Taylor: Can I make another point here? Often provision of water supplies and sanitation services in rural areas is justified on the basis of delivering services to the poorest of the poor. There is a lot of evidence to suggest that the conditions of slum dwellers in cities is much worse than the conditions of rural dwellers.

Mr Mutter: Especially for sanitation.

Mr Taylor: Particularly for sanitation but, also, if you look at the morbidity and mortality statistics. It varies from city to city, of course, but particularly but not exclusively in Africa quite a clear picture is emerging, that the situation in the slums is often - not always - much worse than in rural areas.

Q33 Andrew Stunell: Part of your mandate is to do with planning and land tenure. I wonder if you could just report back to us on how the UN Housing Rights programme is proceeding and whether you could actually say it was producing any results.

Mr Taylor: Yes, we are working on the Housing Rights programme in combination with the High Commissioner on Human Rights. We find that the rights approach is one that is very good for advocacy; it allows you to make a case for doing something. This is part of the whole process of trying to increase the footprint of urban. Having said that, we do not believe that on its own it is sufficient. The danger always is that debates about rights also tend to disconnect from the other things that you should be doing in order to achieve practical improvement. In our view, rights is good but it is very important to connect with policies with regard to slum upgrading, with regard to investments in infrastructure, and with regard to land rights, and so on and so forth. So, yes, this is an important part of our armoury but it is not the most important part, by any means.

Q34 Andrew Stunell: I guess that in most slums, even informal slums, the majority of people are actually tenants rather than landlords, if I can put it way; they are paying to be there rather than owning land. I think you began to point to the fact that this is not quite the panacea solution - give everybody a square yard or two to put their shack on. What do you see as the balance of the land tenure argument against the other things which need to be done?

Mr Taylor: We see land tenure as being extremely important. Indeed, it is the fear of eviction which probably is the strongest disincentive to investment in the improvement of shelter. There are a lot of arguments, principally put around by people like Hernando de Soto who argue that formal titling, as has been done in the West, is the solution to many problems; that if you get formal title you can release capital that can be used for other purposes. We believe titling, yes, is important, it can do what he says, but whether it is the appropriate solution, particularly for developing countries, we would tend to say that it is better that you have a range of solutions. We tend to find that titling is too cumbersome, too expensive and, frankly, not practicable in many countries, given the numbers of people who are living in slums. We would argue that, in fact, there is a continuum of land rights that need to be addressed, but at the most basic level it is a perception by residents of slum areas that they have security of tenure. That, even of itself, is one of the most important levers you can get for slum dwellers themselves to invest in the improvement of their own conditions.

Q35 Andrew Stunell: Could you give any hands-on, practical example of where you can see an improvement having been made in the tenure situation which has led to that increased sense of security? You have asserted it as a theoretical point, but is there a practical example?

Mr Mutter: Yes, the City of Solo in Indonesia has a very dynamic mayor and he set about a very specific programme, which is government promoted but, often, not implemented, of ensuring that in the pockets of slum areas that have been identified for improvement the land titling is the driver. In that particular set of circumstances it does release commercial loans from the local banks. It is an interesting case of a particular city having a political will from the leadership to ensure that this is carried out. Unfortunately, in many cases, there are so many vested interests entwined with politics that it becomes defeated. What is interesting about this city is that the next meeting of the Asian Ministers of Urban Development and Housing will be held there in July next year, so they will have a first-class example on their doorstep of being able to see how the effects of land titling have led to improved conditions.

Q36 Mr Singh: What is the slum upgrading facility? What does it do? What problems are you experiencing? What successes have you had?

Mr Mutter: This came about from a lot of ideas that had been put together from the year 2000, but it was not until the 19^th session of the Governing Council of UN-Habitat in 2003 that the idea was formalised and it was not until 2004 - and largely with DFID's foresight to put money up front for this slum upgrading facility - that it could get off the ground. The very basic idea is that through proper planning and technical assistance and through, ultimately, the availability of a guarantee system at the local level that the commercial banks will be attracted into slum upgrading projects that are put together, largely, by the slum dwellers. In these cases, slum the dwellers become not beneficiaries, as a terminology, but clients, because they are the ones who will be making the repayments on the commercial loans. So this whole notion turns about the whole idea of someone waiting for someone to come along with a dollop of money to improve their life; this is a real enabling process for those slum dwellers, and they respond very well. The other interesting aspect of that market segment, shall we say, is that they are very much better at repayments than their middle income counterparts who tend to have a default rate that is much higher. It is very similar to the kind of experience that the world has witnessed with microfinance, and the way in which the peer group ensures that the major repayment is made regularly and on time, and if there is a problem with a member of the group that problem is resolved at the group level before it becomes a problem with the financial institution or the bank at a formal level. Savings, also, provide that very initial stimulus at the local level. However, as a facility (and we are only coming towards the end of our first three-year pilot programme in four countries: Indonesia, Sri Lanka, Tanzania and Ghana), we are beginning to see the commercial banks participating. They do it, very largely, when they are involved in the process at the local level. So in order to facilitate the process locally we have developed a methodology of what we call local finance facilities, multi-stakeholder groups in a not-for-profit company, where everyone can be involved. You may ask about the longer-term sustainability of such groups, and where we have had these established at an early stage, after a number of years governments are dedicating national budget lines (for example, in the case of Sri Lanka the Government of Sri Lanka has dedicated a national budget line to permanently sustain this local finance facility there). It is then able to pick up the pockets of slums in cities like Colombo, but across Sri Lanka, and, hopefully, also, in due course, in the North where there are going to be a lot of displaced people needing access to reconstruction activity. What we find is because the expertise is contained locally and is stimulated locally they become a problem-solving institution in their own right. If you have got a land problem it is more likely to be solved by this finance facility. The banks are happy to be involved from the very beginning in these processes and we are absolutely amazed by the speed with which both the slum dwellers and the commercial banks and government are able to come together and see the value of this kind of local facility.

Q37 Mr Singh: Have you come across any obstacles?

Mr Mutter: There is an obstacle to expansion through not having the longer-term finance available, and that is what I would still stress; to have a ten-year window of funding would enable it to expand before the guarantees that are placed are absolved. There is a need for five- to ten-year money as capitalisation of that process. We have started, and it is looking good. The only other obstacle that takes time is the land issue, but with persistence over the period of time, even the land issues can be resolved.

Q38 Mr Singh: Do you have any plans to generalise this model when the pilots come to an end?

Mr Mutter: As I say, we are coming towards the end of the third year - by the end of this year will be the end of the third year of the experiment. We have had a mid-term review that is encouraging, and the group that oversees this process have said they would like to see another two years carry on of the pilot - another three year period. We have not got the funding secured for even that period yet, but there is optimism in the process. I think, when we have been able to evaluate all of the different characteristics of different countries, there will be an opportunity to say, okay, this now needs expanding with the 100 million ----

Q39 Chairman: How many people were covered by the four pilot schemes?

Mr Mutter: For example, one of the pilot schemes is the whole of Sri Lanka. Of the individual projects, there are six individual projects within Sri Lanka being covered, and that is covering about 6,000 people all together. That is typical in each of the four countries. The requirement, especially if it is going to keep pace with preventing slum formation, is going to be quite large, but the commercial banks do see this as a market system that they ought to be into and the reflection of that is in what we call the gearing ratio. In other words, for a given guarantee, how much more money is the commercial bank willing to put it? At the moment, it is 2:1 in Sri Lanka, in one case, it is 4:1 in Tanzania, but we would like to see 10:1 being the norm going forward. It will only come about with the banks being able to see that this is a workable process and gaining confidence that there will not be massive defaults in the process.

Q40 Mr Singh: You said earlier that DFID had been helpful in putting money up front. Has DFID continued to have an involvement with this facility?

Mr Mutter: Yes, absolutely. They are a member of the overseeing board of the process. We have just recently had one of the board meetings in Nairobi and we will have the next one in Tanzania. DFID want to stay involved, but they gave 50 per cent of the overall funding, $10 million, right up front and have naturally been impatient to see the results coming in. It has taken longer than was originally anticipated. Nevertheless, there will be, I think, good results to show, and an opportunity to continue investing in the process, let us say, in the next two years.

Mr Singh: Thank you.

Q41 Chairman: The World Bank has increased its commitment towards urban poverty reduction - I think the figure they are identifying is 10.3 billion - but you have also said that the World Bank, for example, was not being particularly forthcoming in helping deal with social deprivation, housing and innovative forms of funding and addressing that issue. How closely are you able to work with the World Bank to, perhaps, help shape the way they approach that? Do the Policy Reduction Strategy Papers give enough focus? You are shaking your head already! Perhaps I can put the question the other way round: what do you think the World Bank should be doing, or you would like them to be doing?

Mr Taylor: Let us take the PRSPs, first of all, or the Country Assistance Strategies. I think we know of only one Country Assistance Strategy of the World Bank where urban is treated as a significant sector, and that is Vietnam. I am not aware of any other. So there is obviously a big gap there. This is also true for the UN sponsored processes - the UNDAFs - as well. The way we have chosen to address this in UN-Habitat, under our own medium-term strategic and investment plan, is to start a process of development of what we call Habitat programme country documents, which we developed with the governments together with other stakeholders in the country, to actually develop a programme to deal with urban issues, and then to talk to some of the key players, particularly on the UN side but, also, from other players like the World Bank and the EC, which is also quite a powerful player in many countries, to give an evidence base on which to give increasing attention to urban. In terms of relationships with the World Bank in general, these have gone up and down over the years. In round about 2000 we came together on a joint venture basis to establish something called the Cities Alliance, where we would trade off the comparative advantages of UN-Habitat and the World Bank to try and make more of an impact; Habitat particularly to do a lot of the pre-investment work, World Bank to provide the finance facilities. That has worked to some degree and we are continuing to collaborate, but it has now become much more of a multi-donor group than UN-Habitat and the World Bank. We have had recent discussions with the World Bank over its own new development strategy, and I have to say that it was a very good discussion. What we are seeing now is that many policies are in the mix; there is much more uncertainty about urban policies than in the past - what are some of the key levers - and this is reflected in the World Bank's last World Development Report, which dealt with urban. We are collaborating with the World Bank in terms of the further elaboration of its urban strategy, and using that opportunity to look at opportunities for increased collaboration. We have identified five countries, so far, in which we would like increased collaboration (if I remember correctly: Kenya, Philippines, Burkina Faso - I cannot remember the other couple), where we would drive this collaboration in conjunction with the Bank's new urban approach. However, by the same token, in terms of trying to up our game, as UN-Habitat, we are embarking on a peer review process whereby we ask our partners what they think of us, and the World Bank is very keen to get involved in that, to do some critical and, hopefully, constructive comments on what we do and the way we do it. Also, the World Bank, in our latest discussions, has been very eager to become involved in a new initiative of UN-Habitat called "The World Urban Campaign". This is a campaign to promote sustainable urbanisation, which addresses environmental issues, equality issues and financing issues.

Q42 Chairman: In all those areas the World Bank ought to be a significant partner.

Mr Taylor: That is right, yes, and to advance the sorts of arguments that we have been putting forward to you today, because the World Bank, like ourselves, feel that urban, in terms of its potential for contribution to sustainable economic development, is not really punching its weight.

Q43 Chairman: My final follow-up question is the sustainable point, on two counts: first of all, these expanding cities, if they are not expanding in any kind of organised way, will be contributing to the problems of unsustainability, over-use of water and emissions. The first point is how you ensure that development of these cities is done in ways that are sustainable rather than adding to the emissions. Secondly, an awful lot of them are in vulnerable coastal locations, which could therefore mean that they have threats. Are you working with the UN Framework on Climate Change to try and put those things together?

Mr Taylor: Yes, we are; we are working very closely. In fact, there is going to be a special working group session on urbanisation. There is quite a debate on whether we see cities as culprits or cities as areas of opportunity.

Q44 Chairman: The point we were making in our sustainable development inquiry is that you partner developing countries to ensure not that they are blamed but that any development they do is, wherever possible, using the most up-to-date sustainable technology rather than saying: "Do whatever you want and we will sort it out later".

Mr Taylor: Absolutely right. We see already that the various city forms have an incredibly powerful impact on emissions. American cities, for example, emit per capita something like four times the emissions that European cities do. This is energy related and transport related, and it has a lot to do with urban form and density, and so on. So there are lots of things that you can do in that area. There are technology fixes as well. We would tend to say that, as a crude generalisation, developed countries should particularly address mitigation issues - that is reducing greenhouse gas emissions - and developing countries should focus on adaptation - that is, to meet the results of climate change. The results of climate change are already with us. I do not know whether you have received evidence on this so far, but the frequency of natural disasters, for example, is increasing dramatically, and particularly those coastal cities that you mentioned, particularly in Asia, are very much on the receiving end of those natural disasters. I think the particular challenge we face at the moment is to make certain that whatever we do in the way of addressing climate change also addresses poverty issues as well. Things could be done in such a way whereby those who are the most vulnerable could actually be left out if processes go as they have done in many cities in the past, where the poor, frankly, tend to get neglected, and generally speaking it is the poor who are living in locations which are the most vulnerable to the impacts of climate change-related events.

Q45 Chairman: Thank you very much indeed. I think it has been a fascinating discussion. It is interesting that if one just thinks about the general focus on development, all the images people tend to have in mind are rural yet, in reality, the poverty is predominantly in urban areas. It does suggest we have got a mismatch, even in just thinking about it. Certainly, when you look at a lot of the NGOs and charities, a high proportion of them are doing rural projects where they could be doing urban projects. I think it is a very interesting for us to explore this, and we are looking at some aspects of it in our visit to Nigeria next month as well. Thank you very much indeed; I think it is fascinating to hear what you are engaged in and all the sort of various parameters that have sprayed off in different directions. Thanks a lot for coming and giving us evidence.

Mr Taylor: Thank you very much for the opportunity, and we very much enjoyed it as well.

Mr Mutter: Thank you.