Examination of Witnesses (Questions 1-28)
Q1 Chair: Good
morning and welcome. Thank you very much for coming in to speak
to us. As you will know, we are undertaking an inquiry into the
UK's aid and development relationship with India, which is obviously
part of the bilateral review. We've just had to change our plans
slightly and we are delaying our visit to India until March, as
opposed to the next couple of weeks, so there is a slight time
lag. Perhaps for the record you could introduce yourselves, and
then we can carry on with the evidence?
John Toye: I am
Professor John Toye. I am part of the Department for International
Development in Oxford, which is an academic centre for research
and teaching on issues of economic and social development. I've
been various things in the past, but I've forgotten them.
Q2 Chair: I'm
sure they've accumulated to your sum total of knowledge, which
you'll share with the Committee. Dr Sumner?
Andy Sumner: My
name's Andy Sumner. I'm a Research Fellow at the Institute of
Development Studies, based at the University of Sussex. I work
in the Vulnerability and Poverty Reduction Team on aspects of,
as the name suggests, poverty reduction, particularly around the
MDGs, and in particular, most recently, around poverty in middleincome
countries.
Q3 Chair: The
starting point, obviously, is that India has graduated to middleincome
status, although it is right at the bottom end in per capita income
terms. Again, we know that the UK has committed its bilateral
aid in the past to be 90% to lowincome countries, which
obviously means that as countries graduate that's a shrinking
number. The question that immediately arises is: is that division
between middle- and lowincome countries a good basis for
deciding how you're going to give aid, and if not, what would
be the better way of doing it? And indeed, is the determination
of what is middle and lowincome satisfactory?
Andy Sumner: The
90/10 and the lowincome/middleincome country was fine
10 years or so ago, but now I think the world has changed sufficiently,
particularly the growing numbers of the world's poor officially
in middleincome countries. We can talk about the definitions
that the World Bank uses. If the mission is poor people and poverty
reduction, rather than poor countries, the LIC/MIC—lowincome/middleincome
countries—thing which is about poor countries needs revisiting.
So if you want to move over to something that's more about where
the poor people live, and DFID's mission of poverty reduction,
it might make sense to revisit that. There are various possibilities
you could look at, and probably someone needs to look at the different
options and suggest. You could look at the new UNDP Oxford Multidimensional
Poverty Index. There were some data constraints, but I think
it does a pretty good job. You could look at a formula that also
perhaps looked at the Human Development Index, and that would
give you a bit about per capita income as well as human development
factors. You might well want some kind of formula that mixes
together the domestic resources available, the capacity for taxation,
foreign exchange reserves and a poverty indicator to give you
some sense of how you allocate aid. The 90/10 thing dates from
about 2002, and a very famous paper by Paul Collier and David
Dollar, which you're probably familiar with, and I wonder whether
that does need revisiting, because the world has changed sufficiently
to warrant a revisit.
John Toye: Yes,
I agree that there's no huge significance in the change from being
at the top of the poor country league to being at the bottom of
the middleincome country league. Nothing very much has
to happen to a country for that line to be crossed. It is just
indicative of a general process of growth and development in some
of the countries that are receiving aid. That obviously has to
prompt a rethink, which your Committee is undertaking, of whether
commitments like the commitment of 90% to lowincome countries
is a particularly sensible thing. I entirely agree with Andy
Sumner that, given that India has now crossed this line, it would
be sensible to think about that again. A lot of people would
prefer it if the poverty target was related to people rather than
countries.
Q4 Chair: Is it
aggravated by the fact that the Government doesn't have a strategy
for middleincome countries? We, as a Committee, have asked
them to do it and they've declined, basically. Or do you think
that even that argument is superseded by the statistical changes
that you've both just outlined?
John Toye: No.
I think it's sensible to ask the Government to think about how
they're going to relate to countries that are middleincome
countries. There are a number of middleincome countries,
not merely India, that have what are referred to as pockets of
poverty. They're rather large pockets if they're rather large
countries. You would want to have the Government think about
how to deal with countries that are not, on average, any longer
lowincome, but where there are quite a lot of lowincome
people. That is a genuine problem, and they could exercise some
grey cells on that.
Q5 Chair: We might
want to explore this a bit more, but one of the arguments, depending
on how you define middleincome and what the figures are,
is that it implies that it's the responsibility of the country
to sort out its poverty. For a lowincome country the presumption
is that it's so poor that it doesn't have the capacity to resolve
its own poverty problem. Again, do you think that is a legitimate
argument, or do you think, when you're talking about $976 being
the threshold, that at that bottom end it doesn't make much difference?
I think, Professor Toye, you're implying that.
John Toye: I'm
not sure. You take that one, Andy.
Andy Sumner: I'd
say something about the moral responsibility issues. On DFID
and MICs, very briefly, DFID, as you know, works in 27 middleincome
countries, with a spend of over £1 million in each of those;
about £1 billion of the bilateral spend in 20082009.
I think probably, given the general shift in poverty towards
middleincome countries, it's starting to think about these
issues, and realising that it does need a strategy of some kind
for middleincome countries. You can't approach them in
quite the same way you think about lowincome countries.
On whose problem it is—that kind of issue—the
Martin Ravallion work at the World Bank, which some of you may
be familiar with, looked at the capacity to put in place taxation.
The interesting thing about that was that Martin Ravallion asked
the question: "What kind of marginal tax rate would you need
on the rich those earning more than $13 per person per day - to
end poverty in developing countries?" Two interesting things
come out of that. First of all, there are some large middleincome
countries with very large pockets of poverty: India, Nigeria,
Pakistan, China. These would need marginal tax rates that are
far too high to even conceive of going down that route, let alone
taxation systems in developing countries and the various issues
it raises about the capacity to collect that revenue. There were
a number of smaller middleincome countries that nevertheless
have poor people and could raise taxes. Indonesia was listed:
it only needed a marginal tax rate of about 8% in order to end
poverty in Indonesia. It might be worth looking into some of
the tax aspects of this.
This is one route that a lot of donors are going
down. I know the Norwegians are looking at technical assistance
for taxation purposes in a number of Latin American countries,
where they're helping Governments talk about taxation with tax
lawyers and their relationships with international companies.
Ravallion's work assumes that you don't touch corporation tax,
you just think about marginal tax rates on individuals. So there
is scope in some smaller countries, but when the bulk of the world's
poor live in middleincome countries, there are just too
many poor people to go down that taxation route. This suggests
that there's some kind of shared responsibility rather than one
or the other. I don't know if you want to add on the moral dimension?
John Toye: Whose
responsibility is it? It is fair to say that the Government of
India has always accepted responsibility, even at the point where
it was very definitely a lowincome country. Again, I don't
think that any big change has occurred. The real question is
to what extent countries like the UK should be involved in assisting
them in that responsibility; not, as it were, removing the responsibility
from the Government of India. I'm sure they wouldn't accept that
for a moment. How can aid donors best assist in that process
without being politically intrusive in a way that wouldn't be
possible and wouldn't be acceptable?
Q6 Mr McCann:
Good morning, gentlemen. The Chair has already covered some
of the issues, but if I could just probe a couple of them. Given
the graduation of many lower-middleincome countries, can
you tell us what you feel are the implications are for the wider
donor community? The specific question is about DFID, given the
90/10 split, recognising the point you made a few moments ago
about the extreme poverty that still exists in middleincome
countries. Do you believe that that ratio should change, and,
if so, what should the ratio be?
John Toye: Yes,
I do. I don't think it's a particularly good target. Amending
the 90% to some other number is not a particularly sensible path
to go down. I would try and refine the target. I'd rather change
the aim somewhat, rather than just alter the indicator in an existing
target, because it's clear that this is going to be a recurring
problem as more countries graduate over this particular line.
We don't want to be coming back to this for some other country
in five years' time. We want to have an aid policy that, as it
were, finesses, or sidesteps this particular target, by looking
at how big these pockets of poverty are. What is the best way
of assisting countries?
Andy's suggested that possibly one could follow the
line of Martin Ravallion in looking at taxable capacity of countries
and the ability to remove these pockets of poverty with the existing
taxable capacity. I'm not so convinced that that is a sensible
way of going about it, because in fact redistribution policies
don't proceed on the taxation side of the budget. They proceed
on the public expenditure side. So I found Ravallion's work interesting,
as one does as an academic when someone is biting into a new idea,
but I didn't, in the end, find it particularly practical.
Q7 Chris White:
If I heard you right, you started your answer by saying, "Looking
at how big these pockets are," as a primary position. We're
giving aid without knowing perhaps what the problem is. Is that,
in your view, back to front?
John Toye: I was
responding to the Chair's question as to whether or not the Government
ought to try to develop a strategy for aid in middleincome
countries, and I was agreeing that I thought it was a good idea.
I wouldn't want to go so far as to say that people in DFID have
no idea of what the size of the pockets of poverty are in the
middleincome countries that they are relating to. That
would be a step too far.
Q8 Anas Sarwar:
Just moving specifically on to India, and where that fits into
the discussion we've already had. Do you think DFID should be
giving aid to India based on 450 million people living on less
than $1.25 a day?
John Toye: That
is one indicator that can be used, although there are obvious
problems with doing the accounting of that number. Clearly, the
notion of living on $1 per day relies on some exchange rate ideas—what
a rupee is worth in relation to the dollar, for example—and
also what it is that constitutes the key consumption basket of
the poor. What is it they have to buy in order to survive? That's
just one indicator, and Andy has suggested various other indicators
in his previous answer. He laid out a range of possibilities
for alternative indicators for counting the numbers of people.
Q9 Anas Sarwar:
Put in another way, firstly, should DFID give aid to India?
If so, what factors are there that crystallise that decision for
DFID to give aid to India?
John Toye: DFID
ought to be considering whether it can effectively give aid in
ways that reduce the number of people in poverty. With the focus
on people, you need a criterion—whether it's the $1 a day
criterion or some other—to count them, and then the question
is, "Can something be done in relation to those people?"
It seems to me the history of the aid relationship with India,
which is now very extensive, indicates that there are plenty of
things that can be done, even though the Government of India is
very precise about what it will allow bilateral donors to do.
These aid relationships are negotiated relationships. The Government
of India will say what it will allow DFID to do, and DFID has
to ask itself the question: "Within these constraints of
what is agreeable to the Government of India, can we, in fact,
reduce the number of people, however we're counting them, in these
pockets of poverty?" That's the common-sense criterion for
what DFID should be thinking about.
Q10 Anas Sarwar:
I just wonder what your thoughts are on that?
Andy Sumner: I'm
not an India expert, as I think you're aware. I try to think
through these arguments myself on middleincome countries,
and John's completely right: this is going to be increasingly
an issue, particularly for DFID. I think DFID knows this, and
this live debate is happening. Ghana's probably the next country
to upgrade next year, by the way, which will of course be a surprise
to everyone, because it's probably seen as a lowincome country,
but they've recalibrated GDP. I did a blog to try and think through
aid to India.
The arguments against having an UK aid programme
in India are about the resources of the central Government: the
$300 billion in foreign exchange reserves, the space programme,
the nuclear weapons. Pakistan is a middleincome country
with a lot of poor people and it has a nuclear programme, but
noone's saying we should think about revisiting aid to Pakistan.
Arguments in favour are about onethird of the world's poor
living in India; 450 million poor people at least. If you use
the kind of multi-dimensional poverty measures I'm talked earlier
about, it's a lot more poor people. DFID could work in different
ways with poor people. It could favour disadvantaged groups or
disadvantaged areas. It could think a lot more about the thorny
issues around equity, and the fact that India now has what are
quoted as Latin American levels of inequality. Again, there is
a new study that's just been put out on that.
DFID could also think beyond aid as a transfer of
resources, and think about things like the debate about global
public goods. Middleincome countries matter for those kind
of debates around climate, tax havens, remittances, trade policy—all
those beyond aid issues. However, there is also a bunch of issues
around working to support the progressive, propoor actors,
whether they're in the state or in the nonstate sector,
to try to influence as a role of aid as well, towards being more
transformative. One reason why there might be quite so many poor
people in middleincome countries is perhaps that a number
of those countries haven't yet gone through a major transformative
change to a different type of economy, taxation system, governance
structure—those kinds of things—but they've attained
a certain level of per capita income. There's a bunch of issues
there that need unpacking.
Q11 Anas Sarwar:
Just one last point. Just picking up on what Professor Toye said,
should donor countries be allowed to dictate where we're allowed
to give aid? Is there not maybe a focus more on the people rather
than what an individual donor Government would rather us do?
Chair: You mean recipient
Government?
Anas Sarwar: Yes, sorry,
yes. Should we allow them to dictate where the aid goes in terms
of what you're allowed to do and what you're not allowed to do,
particularly when you focus on the point that it's 0.1% of India's
GNI. So they're not an aiddependent country. Should we
allow them to dictate to us where the money goes and where we're
allowed to go?
John Toye: You
see, there are two ends of this aidgiving spectrum. At
one end you've got the aiddependent countries, who we're
all upset about, and we think, "My goodness, are these people
never going to get off aid?" On the other, you have the
nonaiddependent countries, like India, which has got
an excellent system for managing inflows of foreign aid. There's
a high management capability in India, and the question there
is: "Do you want to give your aid to a country that has a
high aid management capacity?" If you do, then they'll have
views about how those resources should be managed. You won't
have the problem that you've got some country that you can't stop
aiding because you're providing so much of their resources.
If your resources are such a tiny percentage of their
national income, then you have absolutely no leverage. If they
say, "We wouldn't like you to operate in these 20 states,
but you're perfectly welcome to have projects in these particular
states," then you haven't got a lot of leverage to say, "We're
going to do what we think is right." There's a question
of political realities in this relationship. India is a country
of a billion people. It's not a question of being dictated to.
It's a relationship; it's an international relationship, and
there has to be negotiation. To view one country saying to another,
"We'd like you to do this," as a form of dictation is
not going to be very helpful, I don't think.
Q12 Alison McGovern:
Andy, I want to take you back to what you said briefly on supporting
progressive propoor—you were alluding to some sort
of policies or action. What would that look like on the ground?
What are some examples of that? We understand the inequality
that exists in India, and there's a question about our role in
health and education. My question is, how far do you think DFID
aid can be effective in supporting the creation of the sort of
welfare state that we would expect in a European developed country?
Andy Sumner: The
first thing to say is that the Indians themselves are thinking
about these issues, particularly around equity. I don't think
it's necessarily a donordriven thing. In fact, recently
Sonia Gandhi chaired a meeting of the great and the good to try
and talk about these things for two days, with people like Joe
Stiglitz and that kind of group. When I was talking about supporting
progressive forces, DFID already does a lot of work with civil
society. At a simple level it's support of civil society, and
this particular administration at DFID sees a strong role for
that kind of—I wouldn't want to use the words "big
society"—but a greater role for civil society in calling
to account government and social movements.
You could also support the collective organisations
of the poor: farmers' associations, producers' organisations.
They may well represent power hierarchies at a local level, but
they're important organisations in terms of advocating on behalf
of the poor. How do these organisations try and influence policy
processes in India, and how could DFID support civil society in
India in that way? The trick is that one plays that role without
alienating other actors in India by appearing to be too instrumental
in the political economy. DFID has done a huge amount of work
on governance and on civil societybuilding and civil societysupporting.
I don't know the exact details of DFID's programme in India,
other than that they work a bit through the central Government
and in four states.
The underlying issue is: what is aid actually for?
What are you trying to achieve? You could put kids into primary
school next year, and that is good and important. But does aid
have an underlying role as a catalyst for more transformational
development, so that in 30 years' time India may not need aid.
You could argue that it doesn't need aid now. It will graduate
from IDA eligibility with the World Bank in three years' time.
That might be another time to review these questions. You're
talking about 39 lowincome countries left. Of those 39,
my estimate is probably only 25 will be lowincome countries
in about 10 years or so, and those 25 remaining are pretty much
looking aiddependent forever. There's an issue about what
you do to support those countries, and what you do in those countries
is probably quite different from what you do in middleincome
countries. Does that answer your question, more or less?
Q13 Alison McGovern:
Yes: I think we've just got to the nub of the point, which is:
is aid for politics, or not?
Andy Sumner: Yes.
What is aid for?
Q14 Richard Harrington:
Professor Toye, I was very interested in what you said about
the Indian Government setting conditions, which I knew about,
but not the detail. One example you gave—I don't know whether
it was a theoretical or actual example—was which states
can be recipients of aid. Are there examples of things that are
more contentious than that, things that the British Government
might find illogical; for example, aid to areas where it's deemed
it might be needed politically to help a certain political party
to bring, effectively, income to a particular state? Or is it
all fairly logical stuff to do with the logistics of different
countries giving aid, and where the Indian Government's strong
and where it's weak?
John Toye: I think
it's, broadly speaking, sensible. There are always points of
irritation in any negotiation, or there will be moments when the
donor will want to do one particular thing, and finds that there's
a lot of resistance from the recipient. The recipient isn't happy
with this, and you don't understand why. Broadly speaking, the
Indian approach to aid is a sensible one, from their point of
view. They would prefer, in the first instance, to have multilateral
aid rather than bilateral, because they have a role in the organisations
that provide the multilateral aid. That's their first preference.
Secondly, they have a reasonable preference that the aid doesn't
distort the sectors of the economy or the economy of the states
where they operate, because aid can have distorting effects.
As you can imagine, if somebody came along with a
barrow-load of things that are free, people will want to use them
or have them more than if you put a price on them. Aid is resources
that are free, and if you unload them, a lot of people will say,
"Oh yes, we'd like some of that," and what they'll use
it for is lowreturn projects. It's rational from their
point of view, because the resources are free, so the fact that
returns are low isn't a problem for them. The Indian Government
therefore has a preference for seeing how the aid is allocated
to particular states, and therefore it does say to particular
donors, "You operate here"; another donor, "You
operate there." It also doesn't pass on the full benefit
of the aid to the people who are deciding whether to use it or
not. It only passes on part of the benefit to the actual user
in order to try to stop people flocking in.
Let's say that DFID has the idea that social forestry
is a great thing. If you had no buffer between DFID and the users,
you'd see a lot of people who didn't think much of social forestry
yesterday suddenly thinking it's a great idea and coming up with
lots of rather lowvalue social forestry schemes. The Indian
Government doesn't want their economy messed about in that way.
That's why they have these kinds of restrictions. Broadly speaking,
yes, their approach to the use of aid is quite logical and consistent
with aid effectiveness. There will always be cases and issues
where the two sides in this negotiation don't see eye to eye,
and they can't understand each other's position.
Q15 Mr McCann:
A followon, actually, on this point. Following on from
Anas's last question, and the point that Richard was making, about
your ability to determine where the aid goes to, and the recipient
country having a lot of power in determining those factors. The
point that you made in an earlier answer to Anas was that, given
the sum of money involved, they wouldn't feel particularly pressured
to change. Then, however, in your answer to Richard, you made
the point that India prefers money through multilaterals rather
than bilaterals.
John Toye: Yes.
Mr McCann: The question
I was going to ask is: would the international community not have
more strength if the resources for aid were pooled, and therefore
the money wasn't insignificant; it became significant? Therefore
for the objectives they're trying to achieve, for example on the
UN Development Goals, there could be more pressure placed on the
recipient to co-operate.
John Toye: There
was a famous episode—and I'm sorry if I sound like I live
in the Dark Ages—in 1966.
Mr McCann: I was two.
John Toye: Yes.
When I was a child, India was part of the British Empire. When
I was a teenager, this question of aid to India started, and I've
been following it fairly closely ever since. In 1966, there was
a concerted effort on the part of the multilaterals to use their
leverage to get India to change its exchange rate. They wanted
the rupee devalued. They felt that it wasn't a market exchange
rate, and they threatened to withhold aid. This was the World
Bank; this was the multilaterals in what was called the Aid India
Consortium. They said, "We really think you're not running
your economy properly. You've got the wrong exchange rate, and
we're not sure we're going to continue to give you this stuff
if you don't devalue the rupee." Let's just say the tactic
didn't work. Even the assembled multilateral and bilateral leverage
in 1966, when India was in a much more precarious economic position,
wasn't adequate to get the rupee devalued by foreign pressure.
I would counsel against anything that looks to the Indians like
foreign leverage.
Q16 Mr McCann:
With the greatest respect, this isn't about trying to suggest
they should be more advantaged economically. This is about looking
at the problems the country has, and focusing aid in the proper
areas. We've moved a long way from 1966, which was closer to
the times of imperialism, and Britain had much greater control
than it does now. What we're looking at is trying to put objectives
in place that will ensure that we take countries out of poverty
and we move them on to that next stage. I just wondered, it wouldn't
be as difficult a negotiation, I would suspect, if you were dealing
with the type of issues that I'm talking about, as opposed to
asking them to devalue the rupee.
John Toye: I agree
with you, and there are ways, therefore, in which aid can be used
for the purposes that you're considering. I think that the way
to go about it, then, is to be looking at specific sectors and
to use the aid for what I would call demonstration projects.
There's some new idea that the donor has about how to do education
or health or maternal and childcare better than it is being done
in India at the moment. Do it in a way that is more inclusive,
that reaches out to the poor.
You can do this, and it's been successfully done
in India, with a combination of demonstration projects. You don't
need to cover the country with them, but you have to show that
what you are proposing actually works on their soil, with their
people. Then there is what's called sectoral policy dialogue,
where you then talk to Indians: "What did you think of that?
Were you impressed in any way? Do you agree with us that it
did, in fact, take a lot of people out of poverty? Can you see
any snags about generalising this?" It is this kind of consultative
and partnering policy dialogue at a sectoral level around demonstration
projects, where you can say to people, "Look, we've done
an evaluation., We've found out what it was like." You have
to have a baseline study. "We went in there, we found out
what the people were like before we did our project. Now we've
changed the way that health is done."
Let's say we've got better rural health clinics,
and we haven't got all the medical expenditure going into fine
hospitals in urban centres, something like that. "Here are
our results. We've evaluated it. After the project we find that
this has happened: the number of poor people, or a number of people
with diseases that are typical of poor people, has fallen."
Using rational evidencebased demonstrations to talk to
people, talk to the Government, about its own policies. You have
to reason with them, and certainly to accept them as absolutely
equal partners in the enterprise, and get them on board. That's
the way to go about it.
Q17 Chris White:
Thank you for that very vivid example from history. It's something
we do all struggle over; how we use aid and what leverage it can
get. You mentioned the space programme conundrum, and my question
would be: do you think that India invests enough of its own money
in aid?
Andy Sumner: As
an outward donor, or in its own—
Chris White: To itself.
John Toye: Do
I think that? Sorry, I have a slight hearing problem, that's
why I'm a bit hesitant at times. If you want my personal opinion,
no, I don't. I think that there is not the same espousal of the
values of fairness and inclusiveness that we would like to think
we have in this country. I personally would like to see that
change, but I'm also well aware of the limitations of the methods
that can be used to do that. I certainly feel that although there
are strong propoor political movements in India, there are
still widespread cultural inhibitions towards a Swedish notion
of a fair and equal society.
Q18 Mr Clappison:
Could you tell us a little bit more about these cultural inhibitions,
as you see them, please?
John Toye: Cultural
inhibitions are historically rooted, and certainly include clear
caste prejudices and biases. With the development of the country,
and its accession to middleincome status, and its greater
urbanisation, these are gradually being eroded, but they haven't
yet reached the point where you could expect the general cultural
values of the country to be of a Swedish nature.
Q19 Anas Sarwar:
Just very quickly, it does seem from the discussion we're having
that it's almost a political versus poverty argument. Are we
doing the right thing that's the political best thing for us to
do in terms of our relationship with India, or is it more based
on a poverty perspective? In the end, this is what it's all about:
we want people out of poverty and to have an opportunity in their
lives. I wonder how that relationship fits in with the whole
discussion of how the relationship works, about where you can
operate, where you can't operate, how much influence you have.
That seems to focus on the political, and then the practical
is where we're actually doing projects and lifting people out
of poverty and creating opportunity. Is there an argument for
the UK, with other multilateral organisations, with other donors,
to co-ordinate amongst themselves about where they're doing aid
programmes to lift people out of poverty, or should it be focused
and co-ordinated by the Indian Government themselves? I just
think there's a grey line here about whether it is all about building
political relationships, or about alleviating poverty.
John Toye: Let
me just mention another dimension to all of this, which I'm sure
the Committee will want to be aware of in its deliberations.
One of the other donors that is giving bilateral aid is the EU.
The UK has an opportunity, through its influence in the EU, to
affect aid to India. Although you're mainly concerned with the
DFID bilateral programme, there is an EU programme of aid to India
that is also operating, and the UK Government can attempt to influence
its European partners as to how that bit goes forward as well.
I have obviously mentioned quite a few political aspects to this
relationship as well as the technical, practical, economic aspects,
if you like.
I do that because simply approaching it on an economic/technical
basis will not take you far enough. The larger political framework
has to be borne in mind, and it operates as a discipline, if you
like, on what it is possible for British, or even EU, aid policy
to do. There is a question of collaboration with other parties.
It is also a political question. It's a question of the extent
to which—I don't want to put this very crudely—the
donors seem to be in some way ganging up on India; giving the
Indians the impression that they are approaching the problem mobhanded.
That really wouldn't be a very good idea. It would be a bit
of a red rag to a bull. There is already something called the
Aid India Consortium, which allows the donors to talk to each
other about their plans and wishes and intentions, and that kind
of, if you like, light co-ordination has worked pretty well over
the last 30 years. I'm not sure there is a lot of mileage in
more formal attempts to form a coalition of donors.
Chair: We need to get
towards the end of this session, I think.
Q20 Alison McGovern:
I'll be very brief, Chair. You mentioned cultural inhibitions
to equality and poverty reduction. It's fair to say in this country,
there used to be cultural inhibitions to poverty relief also—or
at least the deserving poor and the undeserving poor, and all
of that history that we have.
John Toye:
Yes.
Alison McGovern: Could
you just say, very briefly, how far you think that's shifting,
and are there things that are changing about those cultural inhibitions
now that we should be aware of in the context of this Report and
the decisions the Government are taking?
John Toye: I can
only speak very broadly, and I'll speak very briefly. The process
of urbanisation is the main one that erodes these things. The
worst aspects of all of this are usually to be found in rural
areas, and as the population moves it becomes harder for the coercive
aspects of the caste system to be maintained. I'm highly optimistic
that we will see a change in values. We already have seen changes.
We're bound to see more, and so I'm optimistic about the future,
but it's not the case that these inhibitions have totally gone
yet.
Q21 Hugh Bayley:
I am optimistic, too, that India's economy will develop and lift
people out of poverty eventually, but I'm not persuaded at all
that the 0.1% of GNI provided by donors is making a significant
difference. You, Professor Toye, have said the caste system acts
as a justification for inequality, and there's clearly not the
political will to tax the betteroff—there are as many
middleclass people in India as there are in Europe—in
the way we tax people in Europe in order to redistribute to the
poor. Aren't we fooling ourselves to believe that this tiny drop
in the ocean, onethousandth of a country's income, will
really make a difference? Why don't we target other maybe middleincome
countries that are small enough for our aid to have some traction?
John Toye: I'm
sorry I can't answer this briefly, because to answer the question
I would have to detail some of the successes that aid has had
in various areas, like agricultural research—the green revolution
in India—making available cheap, basic staple foods. I'd
have to look at maternal and child health programmes, funded by
aid, which have hastened what's called the demographic transition,
reducing the size of families. I'd have to look at aspects of
housing, which have been supported by aid in terms of the upgrading
of slums in India, and making them more habitable for the poor.
There's quite a long list, and if I'm to be brief, I couldn't
get through it all.
Q22 Hugh Bayley:
I think that's a very good answer: look at where aid makes a difference.
I don't know India well, but I remember once travelling by train
from Delhi to Agra, and the train moving at a walking pace for
an hour through the city because everybody from the slums were
defecating on the tracks because they had nowhere else to go.
It seems to me unbelievable that a country that has an average
income of $1,000 hasn't got the will to dig a pit latrine every
100 metres through a slum. Is there anything our aid can do to
change these cultural traditions that you talk about?
John Toye: I think
I've said already that there are various social sectors where
we can see the successes of aid, and that I think the method of
proceeding is a method of demonstration projects and sectoral
dialogue. This has, in a number of cases, changed policy in the
Indian Government. It's not that the Indian Government is completely
static on these issues. They have made changes. There are still
many changes to be made. I've tried to indicate both sides of
the story—both the successes of aid, and the challenges
that remain. If I can encourage the Committee to take a balanced
view of the successes and the challenges, then I'll be very happy.
Q23 Hugh Bayley:
Here's a question, if I may, for Dr Sumner—
Andy Sumner: Could
I just add something to that? I was just thinking, over the last
six or seven years, there seems to be a lot more investment in
social policy in India. The poor being left behind became an
election issue about six or seven years ago, and since then there's
been a National Rural Employment Guarantee scheme, a whole range
of additional social investments. So maybe we're more optimistic
looking ahead—
Q24 Hugh Bayley:
Driven politically?
Andy Sumner: Probably.
There are a lot more social movements around the poor as well.
Q25 Chair: The
election before last pivoted, really, on the poor biting back.
That was fundamentally what produced the problems.
Andy Sumner: Yes,
when it became an election issue.
Q26 Hugh Bayley:
I suppose my question to you, Dr Sumner, is this: the relatively
easy question for us to address is whether DFID should have a
development strategy for middleincome countries. The answer,
of course, is yes. But as someone who, I don't know, 15 or 16
years ago introduced a Bill into this House introducing the novel
proposition that aid should be used for poverty alleviation, rather
than export promotion or currying favour, provoked by a £750
million aid project to Malaysia—
John Toye: The
Pergau dam. Yes indeed.
Q27 Hugh Bayley:
Exactly so. I used this motif of 90% to poor people in poor
countries to refocus the aid programme. If one were to
move away from that, what red lines would you need? Where would
you put the red lines to prevent an abuse—or a dilution—of
the aid programme but ensure that you continued to spend aid in
the places, and in the ways, that pound for pound does the most
to lift the greatest number of people out of poverty?
Andy Sumner: There
are two aspects to your question. You could replace the 90/10
lowincome/middleincome country with another type of
metric, like the Multidimensional Poverty Index, so aid had to
go to countries with large numbers of poor people, or parts of
those countries with large numbers of poor people. There's a general
issue about in what context do you get the most bang for your
buck, with aid, in poverty reduction? We've put an awful lot
into fragile states. There are longterm causes, and shortterm
causes here, and we may want to take a more longterm timeframe,
so rather than asking what will give us the most bang for our
buck for aid over the next two or three years, we should ask what
will actually lead to fundamental transformation, so in 20 or
30 years most countries are emancipated from aid. That takes us
down quite a different route from just putting kids into primary
school next year, and the MDGs, which, important as they are,
don't actually lead to fundamental transformation as far as we
want them to. That kind of answers your question. The LIC/MIC
would be replaced with something like the Multidimensional Poverty
Index from Oxford and UNDP, perhaps, or some kind of formula based
on numbers of poor people. We ought to find out what kind of
tradeoffs there are around the cost of poverty reduction
in the short term and long run in different types of context,
particularly given the large spend on fragile states.
Q28 Hugh Bayley:
This couldn't possibly apply in India, because we just don't have
the leverage. They're an enormous country, an enormous economy,
and our aid, even if we hunted as a pack with other donors, doesn't
provide leverage. In other, smaller middleincome countries—you
mentioned Ghana—the aid community could possibly leverage
some policy change. The fundamental debate in this country in
the 19th century was about whether you relieve poverty with dollops
of charitable benevolence here and there, or whether you said
the state had a responsibility to redistribute. In those countries
where we do, perhaps, have leverage, is there sense in trying
to make our aid conditional upon the middle class in those countries,
and business, being contributors through the tax systems?
Andy Sumner: There
is an ethical argument around shared responsibility, as countries
get richer, that the aid budget contributes a certain amount externally,
and domestically, as more and more resources become available,
that the share of the financial burden could shift; whether you
could develop an international norm around something like that,
which the aid industry could use—like the one that's been
used in the humanitarian area, the responsibility to protect the
poor—and extend that international norm into the aid industry.
So you develop a new kind of partnership with middleincome
countries, where there are substantial domestic resources, and
there's much more of a debate about what both sides can do, rather
than, "Here's a dollop of money." This also comes back
to argument that maybe, for most developing countries it's no
longer about money transfers, it's about influence, it's around
global public goods with middleincome countries. The aid
industry itself is shifting, I think. These are the kind of debates
that DFID is having, but it may want to put this all together
in some kind of process that leads to a middleincome country
strategy.
Chair: Thank you both
very much. You can see that it's stimulated a few questions that
the Committee hadn't considered at the start of the process.
Thank you for exchanging those thoughts and ideas. It's not,
as you'll appreciate, just about what we do in India, but perhaps
the extent to which the aid relationship is changing across the
world, with India being a very particular, big, definitive example
of that. I thank you both very much indeed for the evidence you've
given, and invite the other panel to join us.
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