Examination of Witnesses (Question Numbers
1-19)
PROFESSOR LAWRENCE
HADDAD, DR
ALISON EVANS
AND MR
SIMON MAXWELL
24 FEBRUARY 2010
Q1 Chairman: Good morning. It is nice
to see you all. You do not really need any introduction for the
Committee but for the record I wonder if you could introduce yourselves.
Ms Evans: I am Alison Evans and
I am Director of ODI, the Overseas Development Institute.
Professor Haddad: Lawrence Haddad,
Director of the Institute of Development Studies (IDS), Sussex.
Mr Maxwell: Simon Maxwell, Senior
Research Associate of ODI.
Q2 Chairman: As I say, it is nice
to see you all and thank you for coming in. Obviously we are scrutinising
this short draft Bill the Government have put forward. The first
and most obvious question is why do we really need to have a piece
of legislation to meet a long-term target, although the date is
now getting closer, given that those countries, a relatively small
number of countries, who have achieved the target have managed
to do so without any legislation? Why do we need a Bill like this?
Ms Evans: Thank you very much
for inviting me to present today. Indeed, as you set out, so far
progress against 0.7%, which has actually been relatively underwhelming
over its 40-year history, more recently has been achieved in five
countries without placing the target into legislation. If you
look on balance there are probably three quite compelling reasons
why this might be a good thing to do, and maybe I can come to
some of the caveats against those three potentially good reasons
in a moment. The first thing about placing this commitment into
law here in the UK is that it underwrites the UK's position as
a committed international development actor, and I think that
is put beyond question, if you like, by committing this target
into law. The second is that we are in a period of considerable
financial and economic volatility and that may persist for some
time and, given that and given the fact that the ODA[1]
spend is one of the largest pots of discretionary money in the
government budget, one could argue that placing it into law is
a way of protecting that spend against the incursions of what
are many competing demands, both national and international. The
final compelling reason is that globally the calls on development
assistance are likely to continue to increase and every aid pound
is chasing multiple priorities, and to ensure that there is a
continued focus on ODA as a contribution to that global pot placing
it into legislation again puts that beyond question. However,
my own view is that it would be irresponsible not to also consider
some caveats at this time. Shall I go on and say a few things
about three potentially important caveats?
Q3 Chairman: Actually, we are going
to explore that later. Maybe we should hear from your two fellow
panellists.
Professor Haddad: Again, thank
you for inviting me here today. A couple of weeks ago IDS hosted
some PPCs[2]
from our local region, the Brighton region, and we started talking
about MDGs[3]
and one of them said, "What is an MDG?" What am I trying
to say here? I am trying to say that the 0.7% is one of the few
international development goals that people actually understand
and can relate to beyond the immediate development community,
so for the kinds of reasons that Alison outlined I do think on
balance there are compelling reasons to put this into legislation.
I am a bit more sceptical on the risk side and I think that was
reflected in my written testimony to you. I would really like
to spend as much time as we have possible talking about how we
can manage the downside risks of doing so, but I agree with Alison
in terms of the three key messages she has.
Mr Maxwell: Thank you also for
inviting me. My take is that there is a supply side and a demand
side aspect to this. On the supply side what we see is that many
countries have been extremely willing to make generous pledges
at summits like Gleneagles or at financing for development conferences
which are then not delivered in practice. The EU is €20 billion
short of the pledges made at Gleneagles and looks very unlikely
to meet those pledges. The UK has met the pledges and has been
a leader in meeting its commitments but there is an ongoing conversation
about public expenditure in the future and there are always risks
that aid will be subject to cuts. The Bill protects aid and helps
us to make the case for aid. On the demand side, which neither
of the others has spoken about, predictability is a really important
issue for developing countries. It is incredibly difficult to
manage the ministry of finance of a country when people are making
aid promises which are then not fulfilled. Just to give a couple
of examples, in 2006, which is a fairly recent year as far as
these data are concerned, Sierra Leone had planned for a certain
amount of aid but received only half of it. In Cambodia in the
same year the World Bank was only able to deliver 50% of what
it had promised. Some of that is to do with the absorptive capacity
of the countries but quite a lot is to do with the unpredictability
and unreliability of aid pledges. It follows that I am a strong
supporter of this idea for both the supply and the demand reasons,
but particularly on the demand side the Bill helps developing
countries to achieve more predictability in managing their public
finances.
Q4 Chairman: Just on that one, it
might be good for making Britain's commitment a little bit more
predictable but internationally what pitch is it going to make?
Italy, for all practical purposes, is tearing up its aid commitments
and it is just not a credible player. Ireland is a credible player
but nevertheless in its financial situation has cut back, so is
there any real likelihood that the UK adopting such a piece of
legislation will have any impact on any other donor?
Mr Maxwell: It would be nice to
think, would it not, that the rolling stone gathered moss as it
chased down the hill and that other people joined in? We have
seen UK leadership being followed on issues like the commitment
to the MDGs, which received political backing from Clare Short
when she was Secretary of State, and helping to push the idea
through the EU and the UN. As another example, the UK led on budget
support, again not just announcing a measure but also campaigning
with other countries. I can imagine other countries seeing the
value of legislating for 0.7 and wanting to join in.
Q5 John Battle: At the time of the
Make Poverty History campaign one of the themes that came out
was to increase the aid commitments internationally, and I think
it was not just about the non-delivery but to get the amount in
each national budget increased. I was the person who tabled the
All-Party EDM[4]
to try and achieve 0.7% and to say that it should be a pledge.
Tom Clarke in his Bill brought accountability, Hugh Bayley was
another, and there was an all-party push. I was involved in the
conversations with officials and ministers at DFID and at the
Treasury, and they were resisting fiercely, not quite on the grounds,
"There is simply not enough money and you are making us give
an earmarked commitment", but they asked questions that,
as someone committed to the pledge, I am now beginning to take
more seriously. They were questions around quality versus quantity,
and I kind of wonder if we give a commitment to increase the aid,
is there a risk it would displace the quality of aid? I do not
just mean the non-delivery of what we have said we will give,
but because we have got to get rid of the money—there is
a percentage there and we will push it across—is there a
risk then that it will undermine some of the good monitoring and
evaluation that has been built up and so in a sense the process
gets undermined by the need to—if I put it in crude terms—shovel
aid out? Exactly that happened with urban development money in
Britain and I wonder whether there is not a danger of that here.
Ms Evans: One of my caveats about
placing the target into legislation at this point is that this
is clearly an input target. That in itself is no bad thing. It
has been a terrific tool for political mobilisation in many ways,
although, looking over 40 years, I am not convinced it necessarily
has done its job as well as it might, but it has been also used
as shorthand somehow for development and I do not think that that
in itself is a good thing. Aid quantity, of course, is essential.
Without it we would not be able to do the good things that are
done with aid, but at the same time, if we allow it to disguise
the commitment to aid quality to impact results, then clearly
we are into deep water. This particular Government has shown itself
to be extremely concerned about aid effectiveness, so in that
sense this is not something that they are suggesting in any way
would detract from that, but we are talking about a commitment
for the long term and I do think that focusing on the input end
of this problem rather than on the deliverable end and the results
end is potentially looking at the problem the wrong way round.
Professor Haddad: If you look
at the numbers, I think we are about 0.54%, if you look at the
recent DAC[5]
data that came out last week, so to get from 0.54% to 0.7% in
three years is essentially a tripling of the performance of the
past 11 years in terms of speed, so it is a very quick ramp-up;
it is a three-fold ramp-up in spending, if we take 0.7% seriously,
by 2013. I think that will demand a much more beefed-up accountability/impact/quality
monitoring mechanism, and I think you cannot have one without
the other so I think it is a real risk. I also do not know that
the target necessarily makes aid delivery more predictable. It
seems to me that in terms of quantity it could add a lot of volatility
to the delivery both in terms of the denominator, GNI,[6]
but also in terms of this rush to get stuff out and things falling
through the cracks.
Mr Maxwell: Just before you come
to that, on Mr Battle's precise issue there are two questions
here really, are there not? The first is, does quality suffer
if we go to 0.7%? The second is, does quality suffer if we legislate
for 0.7%? They are both interesting questions but the first question
is more difficult than the second. If we are going to give 0.7%
anyway, legislating for it and making sure that there is a safety
net under that number does not make any difference to the answer
to the first question. If the question is the first one, in other
words whether we can usefully and well spend for the foreseeable
future a sum of money equivalent to 0.7% of GNI in tackling what
we know are the enormous problems of poverty and ill health and
lack of education around the world, when we are likely to fail
in reaching the MDGs on all those aspects, especially in sub-Saharan
Africa, then I think the answer has to be that we know from the
evaluation experience and from the record of aid that we can spend
the money.
Q6 John Battle: It would not just
be the MDGs though, because in terms of the UK's focus at the
moment on low-income countries and the policy to move out of Latin
American countries, and we have a programme in India, question
mark, in China, question mark, that we are looking at and there
are issues around that, when countries reach middle-income status
they step out of the programme and the programme moves to focus
on the poorest. If you increase the volume and the need to get
rid of the money, as it were, would that remove the incentive
to ensure that there were proper strategies and focus on poor
countries? I would worry about, "We will just stick with
that for now because that is a way of using the money".
Mr Maxwell: It is, I guess, an
empirical question as to whether it is possible to spend large
amounts of money well. What do we know from the aid effectiveness
literature? A lot depends on good policies in the recipient country.
Donors must work much better together to align behind the priorities
set by the recipient governments. They must harmonise their procedures
following the Paris agenda. The worst case scenario you are painting
is that we are committed to 0.7% and we have legislated for it
and then find that at the margin the quality of aid is declining.
If that were to happen and we had rigorous evaluation (which all
parties support) which demonstrated the fact, then I think it
would be possible to take remedial action.
Ms Evans: I think the point, as
Simon says, is right: we are already in a sense committed cross-party
to 0.7%. We might come to the issue of whether we think it is
the right number but that perhaps is not entirely for this Committee.
Putting it into legislation though, the question in my mind is
whether or not we end up having largely a political conversation
that is about the target as opposed to about what is being achieved.
I have just seen a paper that has been circulated within the Netherlands
which is a sort of revisit of their aid strategy in which there
is quite a strong criticism of the amount of time that is focused
on trying to meet the 0.7% target rather than looking at what
it is achieving.
Q7 Mr Lancaster: I want to ask a
question about predictability in a second, but I just want to
add to that conversation. I am slightly concerned about the pressures,
as we have just outlined, about having to meet this target quickly.
I fully support it, but already we are seeing that if you want
to find an easy way of spending money then you simply double the
replenishment to the African Development Bank or another regional
bank, and the Government has already done that for the last two
or three years. Going upstairs in committee on the various statutory
instruments, we seem to be just increasing the large cheques to
multilaterals, so I am concerned about how on this effectiveness
point this money can be spent effectively. Do you think already
the Government has found in many ways the easy way to spend more
money quickly? Is that going to be a big problem for us? I am
being slightly cynical here but it is just having seen these very
large numbers going through committee over the last couple of
years.
Mr Maxwell: I do not lie awake
at night, I have to tell you, worrying about whether or not we
can spend what is still a relatively small amount of money globally
usefully with very poor people in developing countries. We have
seen a very strong commitment from the Prime Minister, for example,
to abolish user fees and ensure free delivery of health and education
services in the poorest countries. There is a strong commitment
to providing ARVs (antiretrovirals) to HIV/AIDS sufferers around
the world. There is a big push going on at the moment on infrastructure,
with DFID hosting a large conference on joining up Africa. All
these things are very expensive and one of the features of the
user fee and ARV commitments is that they are about funding recurrent
costs rather than capital costs. If you build a road or a power
station that is a capital cost, but if you provide drug treatment
for somebody for 20 years that is a recurrent cost.
Professor Haddad: There are certainly
lots of things to spend this money on that would not be trivial
spends. The World Bank estimates that to halve rates of under-nutrition,
which is something I have talked to this Committee about before,
would cost about $20 billion. That is just one small part of one
sector. There are certainly lots of sensible things to spend money
on. The question is can we spend it sensibly.
Q8 Mr Lancaster: From a predictability
point of view, and ignoring the country variations, given that
it is tied to GNI and that GNI in itself may vary from year to
year, how does that work for predictability, given that there
could be this variation anyway?
Mr Maxwell: Can I comment on that
and I am sure the others will want to as well? What do we do at
the moment? We fix public expenditure in the Comprehensive Spending
Review as a cash amount (subject to inflation) for a three-year
period going forward. If the Treasury were to have a 0.7% target
in mind we would get a number which would correspond to 0.7% of
their estimates of GNI going forward. If a stronger commitment
were made, and 0.7 were required by law, then there could be variations,
but they would be relatively small. GNI goes up by a maximum of
2% or 3%, and even in the last recession, the worst for 60 years
or a generation or for ever, GNP went down by about 5%. So we
are not talking about 30% or 50% variability here; we are talking
about a relatively small variation. One of the suggestions in
the note I did for the Committee was whether or not a three-year
rolling average would enable those variations to be smoothed out.
Some people will argue that there may be other sources of volatility
in the amount of money which actually reaches countries because
once you start with a global aid budget you then start knocking
off money for NGOs and humanitarian aid and so on. My feeling
is that those claims on the aid budget will exist however it is
managed and so this proposed legislation does not make the aid
budget more volatile. The great advantage of countries knowing
that if there is a sharp dip in tax revenues they are not going
to have aid slashed is really important. Predictability is an
issue in the Paris agenda and overall the figure is that even
as late as 2007 only 46% of aid to developing countries was predictable.
It is incredibly difficult to manage a ministry of finance if
you do not know how much money you are going to have the following
year. I have talked to officials in developing countries who have
said, "Well, yes, we have got all this money promised for
education but we do not risk spending it because we cannot hire
teachers if we cannot guarantee that we are going to be able to
pay those teachers three or five years from now. It is too much
of a risk for our public finances".
Professor Haddad: I think this
is an empirical question and I would urge the Committee to look
in other areas outside of development where governments have enshrined
certain funding targets into legislation and had a look before
and after at whether it has increased predictability of flows
or not. I do not think we have an example from another country,
do we, on aid?
Q9 John Battle: Which other departments
in the UK, may I ask, are you thinking of?
Professor Haddad: I do not know
what they are.
Q10 John Battle: DWP[7]
is the only one I can think of.
Professor Haddad: It might be
a good thing to do to check that.
Ms Evans: I do not disagree at
all that at the most macro level committing 0.7% to legislation
provides a degree of predictability, and I rarely disagree with
Simon but I think when you come down a level predictability at
country level is about the aid relationship. It is about the nature
of the agreement and that agreement has relatively little to do
with whether or not 0.7% is in legislation.
Q11 Andrew Stunell: You have come
to exactly the point I was going to raise. If I am sitting in
the ministry of finance in Nepal, a country which we visited recently,
do you think I will be rubbing my hands at the thought of this
legislation going through the UK Parliament in terms of increasing
the predictability of what I get?
Ms Evans: My own view is probably
not, frankly.
Professor Haddad: I think you
would be a bit more reassured that you would have a basis for
discussing predictability with your DFID counterpart, but there
is no guarantee.
Q12 Andrew Stunell: It seems to me
as an amateur here that it is going to probably depend more on
the relative value of the Indian rupee and the British pound than
on the growth of the UK economy or alternatively the rigidity
with which the 0.7% ODA targets are implemented in London.
Mr Maxwell: Exchange rates, of
course, are an issue, but if I were sitting in the ministry of
finance in Nepal I would remember with a certain regret the day
that I hung the streamers from the ceiling to celebrate the Gleneagles
commitments and sat there planning how I would spend the money
on health and education services for my people, I would look at
the books and would realise how much of that aid had not appeared.
I would, of course, always be glad to see the British ambassador
to Nepal because Britain has met its pledges, but I would look
at Britain and would say, "It is great that all the parties
have committed to 0.7%, but just look at the size of the public
expenditure crisis that the UK is alleged to be facing. Are they
really sure they can continue to deliver that level of aid? Shall
I hire that extra teacher on the basis that I have promises from
the UK or should I be cautious about it?" There is a risk
there, I think, so I would say that knowing that it is in legislation
would be a reassurance to me.
Professor Haddad: It is not clear
to me what the externality effects are going to be. Are other
countries going to start reallocating or not? It is absolutely
not clear to me. For countries where UK aid is very important
that is probably a good thing but for countries where UK aid is
not that important will other countries say, "Great. The
UK is committing to legislation. Now we can do less"?
Ms Evans: I think if the commitment
to legislation means that the UK is able to enter into more predictable
agreements at country level that are of a five- or ten-year nature
because the overall envelope is more certain then that is a good
thing, but it is how that agreement is brokered and honoured at
country level that ultimately matters. Whether or not it is in
legislation might not influence that, the binding nature of that
agreement.
Professor Haddad: But not just
with the recipient country; across the donors in that country
as well.
Q13 Andrew Stunell: Just looking
at the point you have made, what do you think the impact of this
will be on the psychology of the civil servants within DFID? Will
it allow them to feel more confident about committing right up
to the hilt to Nepal, for instance, or will it not? Do you think
the existence of this legislation will have an impact on the administration
of aid money in the development of country programmes, or will
it make no difference?
Ms Evans: I think we can only
hypothesise that that would be a good outcome in the sense of
if it provided a clearer benchmark against which commitments could
be made but, as I said, I think the process for allocating resources
to countries, of course, has a number of dimensions to it, not
just the size of the overall envelope. Therefore, the impact of
committing this 0.7% to legislation may in the end be relatively
modest compared to other factors which weigh very large.
Mr Maxwell: You have put your
finger on something very important, which is the approximate time
horizon of planning in DFID. In the old days it was very difficult
to go beyond annual programming with many aid agencies. We now
have a three-year rolling spending framework which gives us at
least three years' predictability, but we all know that development
is a 20- or 50-year project in which you need long-term predictability
of funding. We are at a very particular moment in British history
where all the major parties have made public and high profile
commitments to maintain the 0.7% aid budget. I think we are very
fortunate. I would be surprised if that degree of consensus were
sustainable in the very long term. We should expect the possibility
that somebody may defect from the collective agreement.
Chairman: Perhaps we can move on to the
definition of aid because that obviously is important.
Q14 Mr Evans: The great temptation
clearly is to stretch the definition, is it not?
Mr Maxwell: Yes, absolutely.
Q15 Mr Evans: What concerns have
you got about that?
Mr Maxwell: My main worries at
the moment are about climate finance, internationally rather than
in the UK, and about security issues. On climate, we have a very
strong policy position from the present Government, and I do not
know whether it has been echoed by the Opposition parties, that
no more than 10% of the aid budget should be used for climate
funding. There are, of course, many ambiguities in what you mean
by climate funding. Is this building a dyke to protect against
floods, for example, or is it part of an irrigation system? What
is climate and what is not is an issue, but as long as we hang
on to the policy as expressed, we are more or less safe in terms
of protecting the other aspects of development expenditure from
predation by people who want to spend money on climate change.
More generally we are protected by the International Development
Act which specifies that aid must be used for poverty reduction.
That has never been tested in the courts and there is a very interesting
question about what we mean by poverty reduction. It would be
interesting one day for an NGO to find a Pergau Dam type example
and test the meaning of poverty reduction. To take a very crude
example, is invading Afghanistan a contribution to poverty reduction
in Afghanistan? If that were the case almost the entire military
budget in Afghanistan could be charged to aid? In terms of security,
first of all I think it is legitimate for some aid to be spent,
especially in fragile states, on the kinds of things that contribute
to security. That much is clearly stated in last year's DFID White
Paper. However, we are bound there by the rules of the Development
Assistance Committee of the OECD on what can be counted as aid
and what cannot. I attached to my evidence—I do not know
whether it has been circulated—their little leaflet on what
counts as aid. You can charge police training but you cannot charge
the police. You can charge the marginal cost of using the military
for disaster relief but you cannot charge the core military costs.
There is a debate in Paris amongst the members of the Development
Assistance Committee about whether or not the definition should
be enlarged and quite a lot of governments I think would like
to soften the definition of aid at the edges, in order to put
in there some things that otherwise would not be.
Q16 Mr Evans: In terms of these other
countries that have 0.7%, has an analysis been done as to how
imaginative they have been in the spending of that money?
Mr Maxwell: They are all bound
by the DAC rules. The DAC rules are permissive in some ways that
the UK has not yet taken advantage of. In particular first-year
refugee costs can be charged against the aid budget. That costs
£2 billion a year which is quite a large chunk of the total
aid volume. The UK so far has not charged first-year refugee costs
against the aid budget but there is gossip, and I cannot put it
more strongly than that, that they are looking at whether or not
they should, given the public expenditure situation. It would
be wonderful if you could ask.
Q17 Chairman: So that would effectively
enable them to achieve 0.7% in one bound?
Mr Maxwell: Not one bound, but
it would be one small step.
Q18 Chairman: £2 billion—that
would get close to it, would it not?
Mr Maxwell: I suppose it would.
I do not know what the number is for the UK—£500 million?
Q19 Mr Evans: Alison, have you got
any reservations about this?
Ms Evans: I very much agree with
Simon that there are protective limits in place here, and I think
the UK Government has been extremely responsible in the way it
has managed the ODA definition, as it were, and is a big voice
for trying to hold the line on the ODA definition, but we are
in a changing world, there is no question about it, and I think
the conversation about whether the ODA definition will stay in
its current form is going to happen. It has started. It will not
perhaps happen in the next few years seriously but it definitely
will be on the table at some point.
1 Official Development Assistance Back
2
Prospective parliamentary candidates Back
3
Millennium Development Goals Back
4
Early Day Motion Back
5
Development Assistance Committee of the OECD Back
6
Gross National Income Back
7
Department for Work and Pensions Back
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