CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as House of Commons 1157-i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

International Development Committee

Private Foundations

Tuesday 25 October 2011

DR NOSHUA WATSON, SARAH LOCK and DAVID MCNAIR

SIR IAN WOOD and PETER MCDERMOTT

Evidence heard in Public Questions 1 - 54

USE OF THE TRANSCRIPT

1. This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2. The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the International Development Committee

on Tuesday 25 October 2011

Members present:

Malcolm Bruce (Chair)

Richard Burden

Mr Sam Gyimah

Richard Harrington

Pauline Latham

Jeremy Lefroy

Mr Michael McCann

Anas Sarwar

Chris White

________________

Examination of Witnesses

Witnesses: Dr Noshua Watson, Research Fellow, Globalisation Team, Institute of Development Studies, Sarah Lock, Africa Programme Head, Nuffield Foundation, and David McNair, Principal Economic Justice Adviser, Christian Aid, gave evidence.

Q1 Chair: Can I say good morning and thank you for coming in to give us evidence? I just wonder first of all, for the record, if you could introduce yourselves?

Noshua Watson: Good morning. I am Noshua Watson from the Institute of Development Studies. I am here as the project manager of the Bellagio Initiative, which is funded by the Rockefeller Foundation. The Initiative is doing a series of global consultations and commissioning research on the role of philanthropy in international development. We are looking at the challenges to promoting human wellbeing and how philanthropic foundations can engage strategically with those challenges.

Sarah Lock: I am Sarah Lock. I am head of the Africa Programme at the Nuffield Foundation, but I also share the co-ordinating role of the foundations that support international development that are members of the Association of Charitable Foundations. I think I am wearing two hats here. What I hope to do is to be able to shed some light on what it is that UK foundations contribute to international development, the scale of it and the scope of it.

David McNair: My name is David McNair. I am the Principal Economic Justice Adviser at Christian Aid. We are the official development and relief agency of 41 sponsoring Churches in the UK and Ireland, and we work in over 40 countries around the world with local organisations, and we have experience of the dynamics of poverty at the local level. We think that NGOs have a role to play in facilitating the activities of foundations in developing countries. About 2% of our income comes from foundations, so it is not a huge amount, but we do engage with foundations, both at a funding and at a policy level.

Q2 Chair: Thank you for that. This is the first evidence session on this inquiry. Essentially, we are trying to find out what private foundations do, to what extent they add value to the development field, how they interact with either other NGOs or public agencies and, overall, if the outcome is good, bad, mixed or indifferent. I have no pre-judgment on that. I wonder if we could start off by saying what you think the role of foundations should be. Is it just the will of the philanthropist who set it up or should they have some kind of agenda and should they do something different? You say Christian Aid gets some of the money from foundations, but you distinguished between the role of foundations and the role of Christian Aid. Should they be doing something different and, if so, what should it be-different from donors and from NGOs?

Sarah Lock: Can I first make the point that the whole inquiry talks about "private foundations", which is a US term? It seems that much of the emphasis is on the role of US foundations, so I am just going to be talking about the UK ones. In terms of whether the work funded should just be at the whim of the philanthropist who set it up, to an extent, foundations are bounded by the trust deed that was laid down by the individual or set of individuals who set up the fund, but certainly within the group of foundations within the Association of Charitable Foundations, we are concerned to make sure that we do not duplicate any of the work funded by the larger donors, and, in fact, that we complement it or work on a smaller scale, the scale that these larger funders find difficult to reach, or in areas that, for one reason or another, those larger funders do not support.

To give you an idea of the kind of scale of the UK foundations sector, Nuffield, together with the Baring Foundation and the Paul Hamlyn Foundation recently commissioned a report on UK foundations. We found that, in 200910, their overall giving was £290 million. That represents in scale terms about half of what DFID contributes to the voluntary/NGO sector and a little bit more than 4% of DFID’s total spend. That gives you an idea of how we are operating. We are a very diverse group, with a small number of foundations giving a large amount of money and then a tailoff of people giving smaller and smaller amounts, but with 90 foundations between them giving more than £50,000 a year. We found that, of all the foundations in the UK, they were giving 9% of their total funding to international development.

In terms of whether we are following the mainstream ideas about how best to fund international development, it is fair to say from the study that most of us are. Our key areas are healthcare and education, followed by sustainable economic and agricultural development. That pretty much reflects DFID’s pattern of spending. We work at both the strategic level-working through Governments to help implement various programmes that can then be scaled down-but also at the grassroots level. I would say that our signature strengths are that we are very flexible. Particularly once we have made a grant, we try to work very closely with the implementers so that we can respond to any difficulties that they come across and be able to approve any changes, and we are also very responsive to new areas that need supporting. I think we are pretty much close to the ideal. We do collaborate with each other, in terms of sharing information, although that could be improved, and we also fund collaboratively. Later on if you like, I could give examples of that.

Q3 Chair: David McNair, you say that you draw some money from foundations. That is presumably because those foundations offer you something that other sources of income do not. Could you perhaps give us an example?

David McNair: We see the positive benefit of the flexibility that foundations have. The countries in which we work are highrisk environments and we need innovative solutions. Often institutional funders do not have the freedom to provide that, so we think that is a very important part of what the foundations do. I suppose foundations play two primary roles in development as we see it. First, they can play a role in addressing immediate problems as a result of food crises, and so on and so forth, but they can also take political risks-whether that is the Mo Ibrahim Foundation and its African governance award, whether that is the Open Society Foundations and their work on transparency and governance.

We see that second aspect of what foundations do as crucial. With the trend towards more results- and evidencebased indicators for institutional funding from states, there is a risk that those kinds of intangible issues around governance are neglected. That is where foundations may come in and play a significant role. Ultimately, if we want to challenge poverty, we need to understand the local dynamics. That is where NGOs like Christian Aid have partnerships at the local level; we have been there for a long time and we can help foundations that maybe do not have the capacity to monitor those kinds of dynamics or do not have the experience. We can help them to channel that funding.

Q4 Pauline Latham: You said that foundations can provide innovative solutions as opposed to other bigger organisations. Can you give me an example of an innovative solution that you can provide, or in the past have done, that other people perhaps would not have thought of doing?

David McNair: We have examples of supporting, with funding from Christian Aid supporters and foundations, farming co-operatives in Latin America that initially were not profitable and now are. Some of those kinds of initiatives would not always be supported by institutional funding because of the risks involved.

Q5 Pauline Latham: How did you do it?

David McNair: I think it was a matter of seed funding to get businesses going and providing our expertise in relation to the institutional environment, so helping advocacy to enable those co-operatives to function within the context in which they operate, as well as providing our expertise on agriculture and how to make a business work.

Q6 Richard Harrington: Thank you very much for coming to see us this morning. As our Chairman explained, it is a completely new field to us. My own experience in this field is not in terms of international development but in terms of the use of foundations within the UK for charitable purposes. Without boring anyone too much, I would just like to say how it has evolved here to see if you think there is direct relevance. We found with foundations, when I worked for a children’s charity, that there were two types. There are those that actually become NGOs in their own right, which is not just scale, because some people who have vast amounts of money to give do it through other organisations-which is the second type-but a question of policy. Certainly within the UK field, I have seen from my own experience both being very good indeed. Some effectively are just giving money to organisations that actually spend it and some are setting up the equivalent of the Gates Foundation. For example, to eradicate a type of cancer, they have hired the research facilities, doctors, scientists and all this kind of thing. Do you feel that is how the private foundations will evolve in the international development field?

Sarah Lock: I would say we are already operating in that way. Some, like the Nuffield Foundation, give through NGOs or UK universities. Others, people like the Children’s Investment Fund Foundation, set up and work directly on the ground. Both ways are effective and we will continue working in those different ways.

Noshua Watson: Can I respond to your question a bit more? One of the biggest differences between foundations and donors is that, these days, particularly with more of the emphasis on value for money, donor funds tend to be more specific. You have specialpurpose funds; they are tied up in technical assistance, administration, debt relief and so on. Foundations are able to be a bit more flexible. There is a different kind of accountability and governance that Ministries and Governments do not encounter. Some examples of the kinds of speculative programmes that foundations have engaged in in the past are the Green Revolution, with maize, rice and so on, and population and malaria research. These are things that we take for granted today where foundations funded the initial activities.

With respect to how foundations engage on the ground or how their evolution is changing, what you find right now, to use a US example-because at the moment US foundations still continue to give the most on a country basis-when you look at US foundations giving to poverty, it is approximately $3 billion. Only about a third of that is to international development. When you look at those partnerships, the foundations that are giving are very recognisable names-Rockefeller, Gates, Hewlett and so on-but their partners are still largely thinktanks, academic organisations and NGOs in the US and Canada. Only about a fourth of their partners are abroad in, say, India, Kenya and so on and, even then, they are largely other thinktanks or academic institutions, so there is still a lot of work to be done in terms of building up the links and partnerships between foundations and with NGOs or civil society organisations on the ground.

Q7 Mr McCann: Good morning and thank you for coming to see us today. I think I perhaps know the direction of travel on this answer, but some critics of foundations suggest that they can focus on single issues-they can be isolated-rather than focus on structural and political obstacles to development, such as poverty and inequality. What is your take on that?

David McNair: What we need to do is ensure that what foundations are prioritising is in line with the countrylevel priorities. That is particularly important in the context of the aid effectiveness debates in the runup to the highlevel forum in Busan.

Q8 Chair: By "country priorities", do you mean recipient or donor countries?

David McNair: Recipient countries. There are great examples in Liberia, where Liberia has set up a philanthropy secretariat, which engages with philanthropists on the kinds of decisions that they are making and tries to co-ordinate that at the country level. I wonder if there is a role for DFID country offices or DFID generally in facilitating that kind of co-ordination.

As I mentioned, the risks that foundations are able to take enable some foundations to do quite risky things. The Mo Ibrahim Foundation provides an award for African governance and publishes an index of African governance. That is a really innovative approach to rewarding best practice and encouraging African leaders to manage their countries in a way that benefits the people. In addition, they engage at a country level to help civil society hold Governments to account. That pincer movement of both rewarding the leaders and helping civil society to hold Governments to account is really important and political.

Q9 Mr McCann: When you answered the question earlier, you mentioned that a lot of the objectives of foundations tie in with, for example, DFID’s objectives. Therefore, would you take the view that the criticism is not warranted and, in the vast majority of cases, private foundations are actually complementing the work of governmental organisations?

Sarah Lock: Yes, I think that is correct. On the singleissue issue, particularly for the smaller foundations, it is much easier for us to focus on specific issues rather than addressing everything, but those single issues still fit into the big jigsaw. I think that is fine. Having a single issue helps keep trustees on board and it also helps people who are applying for funding from us to know where to go.

Q10 Mr McCann: Is there any danger that foundations will set up parallel structures to what is being intended on the ground?

Noshua Watson: What we are getting at here is that there is a general issue of co-ordination, not only between foundations on the ground but also between foundations themselves, foundations and Governments, and foundations and NGOs. There is a lot of overlap and there is not necessarily always accountability. At the meeting in Busan, they are going to discuss the Paris Declaration on Aid Effectiveness and whether or not foundations should sign up to it. But when you have an agreement to which not only donors can agree but foundations as well, you risk watering down the principles behind it. The issue of co-ordination not only between foundations but between foundations and other types of organisations is going to be a crucial issue.

Q11 Mr McCann: Is overlap good or bad, or is it both?

Noshua Watson: From an economic standpoint, if your overlap is promoting different approaches to a similar problem, then that might not necessarily be a bad thing, but if you are creating a monoculture of approach to a certain problem, particularly when that approach might not necessarily be empirically proven or state of the art in development practice, it becomes a problem. One role that foundations might play is that, because foundations are increasingly focused on results, they may be more inclined to fund a specific approach rather than funding a variety of approaches.

Q12 Chair: Before I bring in Richard Burden, I just want to clarify something. You said "private foundations" is an American term. We are simply looking at the fact that they are privately funded, but of course the American foundations are big players in the UK and in UK partner countries. It is inclusive-that is the point I want to make clear-and it was certainly intended to be.

David McNair: I was just going to refer to one example that we have been aware of in India, where a major foundation funded some research on HIV and AIDS and conducted some randomised control trials. The same foundation then funded a different NGO, which did not engage with that research agenda or the local NGO that was working on HIV/AIDS and it affected the results. That lack of co-ordination undermined both the sector and the impact of that research. There are examples where this has been unhelpful. It is not necessarily a huge failure but that is where we could look at synergies and co-ordination that could improve things.

Q13 Richard Burden: All of us are struggling with whether there actually is a problem here or not.

Chair: We are not looking for problems.

Richard Burden: There is a dilemma that has come out already in the discussion that, on the one hand, if the strength of foundations of whatever kind can be their ability to move quickly, to be flexible and just go where others are not in some ways, that can add value but can sometimes distort what is going on as well. I was struck by the fact that one of you said that, in making decisions, you tried to listen to what the recipient country would want. Often the issue is: who makes the decision about what the recipient country would be? I know there are different kinds of foundations but, given the fact that they are run by trustees, do you think trustees themselves, particularly in smaller foundations, have got the necessary level of development expertise to make decisions on where to work and how to work? If not, what can be done about that without losing that kind of spontaneity and flexibility that you were talking about?

Sarah Lock: I think you are right. Particularly for the smaller foundations whose trustees decide that they want to do something to support international development work, if they do not have trustees with experience of international development, they need to get that somewhere else. They could decide to fund through the well-known NGOs, because they seem to be doing a good thing, or they could get advice from academic experts, who have knowledge of specific issues or areas; or they could decide to collaborate with other foundations that can provide that kind of input. There are various ways that foundations can get around this, but I do accept that, for most smaller foundations, it is difficult for the trustees to decide on their own what is best to fund.

David McNair: Can I pick up on the governance issue? It is an area where NGOs can play an important role. A small foundation recently approached us wanting to fund some work on land grabbing in Sierra Leone, which is a growing and significant issue for those communities that are affected by it, and it is an issue of governance, in that the Government are not negotiating on deals that deliver a fair deal for the country. We are in discussion with them; we have partnerships on the ground. We have advocacy partners that are engaging with Government, are aware of the dynamics on the ground and can do research; we have a network of consultants. We can then get those messages out to the media, policymakers and influencers across the spectrum. There is a role for NGOs where governance is weak.

Noshua Watson: I think that, particularly with the proliferation of actors in international development and foundations as well, there is a need for capacity building within foundations. As David said, this is a governance issue, and within better governed foundations you find a separation between the trustees who determine the strategic direction of the foundation as a whole and then the programme officers or programme managers who are subject specialists and actually make the funding decisions. As you will notice, when you have the trustees themselves making the funding decisions, they may not necessarily go in the direction they need to go or select the appropriate programme for addressing the problem.

Q14 Richard Burden: I accept what you say, but sometimes it is a combination of the two. This is where, again, we are just trying to probe whether there is a problem. An Economist article argued recently that foundations can quite often focus "too much on glamorous science and longterm technology bets, and not enough on putting boots on the ground in places like Africa". I guess what that would be getting at is that, yes, they are flexible. Perhaps in the health sector a lot of great work may be done in relation to the three big diseases, particularly HIV/AIDS or a good technological thing like the Gates Foundation responding to the emerging threat of drugresistant malaria in south-east Asia. But from a development point of view, are the foundations concentrating enough on building up health systems that themselves could actually begin to tackle those problems? Am I tilting at windmills here or is this something that needs to be addressed?

Noshua Watson: I think you make a very good point about the need for investment in systems-in administrative and technical capacity-as opposed to funding acute problems. Actually I do think that you are seeing a movement towards that. One of the projects I am working on is just on that: building up health systems in lowincome countries. It is jointly funded by DFID and the Rockefeller Foundation as well as eight other donors, the IFC and so on. The difficulty with that is that these become multiactor programmes. The programme we are looking at right now is building up health systems through mining companies. You can imagine the political difficulties of doing that on the ground, but also here as a researcher. You also have to build multidonor coalitions. Where you see publicprivate partnerships seemingly being an appropriate solution, you may find more of a systems focus, but that is very emergent in the field right now.

Q15 Pauline Latham: When you talk about multiple organisations coming together to fund things, is there a problem then with everybody wanting to have their say, a bit like a committee, so you are deciding on things by committee rather than somebody having a clear focus on where you are going? Does it muddy the water by having lots of different organisations working together?

Noshua Watson: Absolutely, but there are two dimensions to that. The first is the goal setting, as in what it is the organisation or the coalition is trying to accomplish, and then the actual administration of it. One example of a publicprivate partnership where you have had donors and foundations come together is the Medicines for Malaria Venture, where they have decided that they want to bring to market malaria vaccines and treatments-ACTs-that would not otherwise be viable in the market by funding some of the research as well as the market research to find ways to deliver it to the people who need the medicines. Because they were able to agree very clearly on what the objective of that partnership was, they were able to have a coalition. Here is an example of the decisionmaking process: on the project that I am working on, funders are taking turns in terms of who is evaluating and who is funding the work. It moves in two to threeyear cycles, so there is a lead funder or a lead evaluator at the time. Otherwise in a coalition of 10 funders, you can imagine that the project would not go anywhere.

Q16 Chris White: Good morning. In the Christian Aid submission, there were various criticisms of UK foundations being unstructured and some of the ad hoc processes that went on. Would you agree that UKbased foundations could be better co-ordinated, and also would you see that there is some duplication going on between organisations’ work? What could be done about this?

David McNair: I do not think we would go as far as criticising UK foundations, but maybe there are lessons we could learn from the US community, where initiatives like the African Grantmakers Affinity Group meet regularly to share information and best practice. Perhaps there is a role for that. Just one example: I was at the IMF/World Bank annual meetings at an event on aid transparency. There was an African finance minister there who was saying it is often very difficult for them to budget, because they do not know where the aid flows are coming in, particularly from private funding. Greater transparency and co-ordination at the country level, in line with the Paris principles, is really important. At the UK level, there may be a role in peer reviewing and sharing best practice. Perhaps DFID could contribute to that.

Sarah Lock: I know that UK foundations do collaborate, but there is scope for more. We and certainly those involved in ACF would be very interested in having formal meetings with DFID to talk about these issues.

Q17 Chris White: Do you think this is something that very much needs to happen, something you would be calling for and something that needs to be happening very much in the near future?

Sarah Lock: Yes. We have had Ministers come to talk to us. At the ministerial level, there seems to be quite a lot of interest in liaison with foundations but, at the civil servant level, particularly when everyone is very stretched at the moment, that is not following through, but it is certainly something we have called for and will continue to call for.

Chris White: While this goes on to whatever degree, it is creating waste, and funds are being lost where they should be going otherwise. Perhaps this is something the Committee should be looking at and start to generate from our side. I do not know what you think, Chairman.

Q18 Chair: That is partly what we are trying to explore right now. What occurs to me is, if there is scope for some co-ordination or some intervention from DFID, which is questionable in one sense, the outcome is: who is adding value to whom? I suppose in an ideal world it is both, but is it necessarily going to be both?

Sarah Lock: I think it would be both. At the technical strategic level, DFID can provide information on that, but as to what is going on at grassroots level, the NGOs have an input on that but so do the foundations that are funding there. They can talk about how they have done it and different ways of doing it.

Q19 Chair: You do not want to get sucked into the bureaucracy.

Sarah Lock: Oh no.

Q20 Jeremy Lefroy: I would like to move on to talking about the largest foundations and particularly Gates, which dwarves all others apparently. It has disbursed something like $25 billion to $26 billion since its inception. Clearly a lot of great work has been done through Gates, but do you see problems in having one foundation being so dominant across such a wide range of activities?

Noshua Watson: It is not really clear what the benefits or disadvantages are of having a kind of monopoly in philanthropic funding in the way that Gates does. On the one hand, they are able to concentrate their efforts and flood the zone with funds. They are also able to co-ordinate in a way that many foundations have not been able to do in the past. One of the biggest issues with having a dominate player is that an independent academic asked to, for example, review or evaluate a project may have a laboratory that is funded by Gates. The problem is that any independent observers in the ecosystem tend to get coopted because of the availability of the funding and the focus on a particular issue. Also, because of their dominance, they have some say over the management decisions made by some of the organisations that they sponsor. When you have a dominant player, you might choke off innovation or alternatives that might be springing up elsewhere. Frankly, a foundation with that kind of influence is unprecedented.

David McNair: I would reiterate Noshua’s comments with regard to accountability and transparency. The role of NGOs in holding institutions to account is crucial, but, where an institution is so dominant in providing funding, that may restrict or disincentivise NGOs from criticising where there may be bad practice going on. That reiterates the need for open management structures and opportunities for NGOs to provide constructive criticism in the right environment.

Q21 Jeremy Lefroy: There is some data from the World Bank that indicates that, in 2006, some 45% of grantgiving of US foundations went to economies such as China, India, South Africa and Brazil rather than the poorest. I would not say that is particularly true of the Gates Foundation, but do you see that as being a problem-that perhaps foundations will tend to work in countries where results are easier, it is easier to work or perhaps it is even as simple as where people prefer to live?

Noshua Watson: This is an ongoing debate within the international development community, because one of my colleagues at IDS, Andy Sumner, has found that the majority of the poor are now in middleincome countries. You have had an increase in income inequality in middleincome countries, but you still have the poorest of the poor. It is an ongoing debate as to what is the appropriate way to structure funding and programmes to reach that.

With respect to Gates specifically, people tend to forget that, in addition to health, Gates funds domestic education initiatives in the US; they also fund a number of agricultural initiatives as well. There are still a number of issues out there that require the kind of co-ordination and concentration that have been given to health issues. The field is still wide open.

Q22 Jeremy Lefroy: Given that Government aid-and I am thinking particularly of DFID-tends to want to focus on the poorest countries-for the obvious reason that taxpayers, as we have seen from the debate in this country, do not want to see their money going to countries like China or perhaps even India, where they think the Governments have the resources to cope themselves-do you think that foundations have a role to play, because they are not so beholden to such political considerations?

Noshua Watson: One of the issues in terms of aid, when you are dealing with the population at home, is that support for aid is declining in general. In order to maintain that support, it is reasonable to focus on the poorest of the poor in the poorest countries. However, when you are dealing with countries like China and India, you have great income inequality. There is no reason why those Governments should not be encouraged to, say, structure their domestic policies in ways that would influence or reduce that inequality. A stronger argument possibly against funding emergent or BRIC countries is that they are becoming donors themselves.

Q23 Chair: On the point you have just picked on about the support for aid declining, do you think the fact that foundations, which are privately funded, are engaging in development and saying, "We can do this and deliver results," helps to restore credibility to that public support? In other words, if Gates, who is a multibillionaire with a very successful business, thinks he can add something to development, does that not reinforce the case that development can work and maybe their scepticism is not so well founded?

Noshua Watson: Our research is based on the UK Public Opinion Monitor. It is not just necessarily a decrease in the credibility of aid or in development; it is also that this is simply a time of shrinking budgets, domestic troubles, all sorts of international issues and conflict, when people are weighing aid versus other spending priorities.

Q24 Mr Gyimah: Financial reporting requirements for American foundations are considered to be far more stringent than for European foundations. In your view, and this is to all three of you, do you think foundations are sufficiently transparent about how they go about their spending? Following on from that, should there be greater requirements placed on UKbased foundations regarding financial reporting? For example, should they have to comply with the IATI?

Sarah Lock: In the UK, trusts and foundations are regulated by the Charity Commission and we have to comply with SORP. Most of us make public what we fund via our websites. If there is more regulation put on foundations, particularly on international development work, I fear that certainly the smaller foundations would just not be able to fund in that area. I think our reporting is transparent enough, and I am not sure where the calls are coming from and what is causing the concern that there needs to be more transparency.

Noshua Watson: I think that the concern for transparency is not necessarily a UKspecific issue. I think it is more of an international issue, but that alone brings complexities. For a national issue, you could say you are going to create a specific status for philanthropies or NGOs, which the UK has, but what would be the extent of Government oversight and reporting? Even then, in terms of internationally, how do you align with other Governments’ requirements and, given we are talking about international foundations and giving, how do you make sure that remains legal in this day and age? There are national solutions, but they need to be integrated within an international framework, whatever actions are taken.

David McNair: I would say that, given the increasing role of foundations in influencing policy, there is a need for transparency around the kind of policy influencing that foundations are funding, because they may have vested interests. I do not have specific examples of this, but the principle of transparency around what kind of political perspectives foundations are funding in a particular context is important.

Q25 Mr Gyimah: Thanks for that. I would like to know what your thoughts are on this idea that the OECD Development Assistance Committee should have a stronger role in collecting data on foundations to complement their monitoring of official aid commitments.

David McNair: I think that is a very positive thing. I would agree with Sarah that we do not want to create onerous bureaucracy that stifles innovation and stifles the ability of foundations to be flexible. I mentioned earlier my example of the African Finance Minister who found information on aid flows, both public and private, crucial in developing their own budget and ensuring that everything fitted together. That principle is very important.

Noshua Watson: I agree strongly, largely because the sources of data right now are largely private or led by private organisations. In the UK, there is New Philanthropy Capital. In the US, you have the Foundation Center and The Chronicle of Philanthropy. In Europe, you have the European Foundation Centre, but there is really not a way to collect data on philanthropy, on giving, on who the recipients are, which is one of the largest problems for co-ordination. If the OECD DAC were involved in that, it would certainly benefit not only philanthropy but also development.

David McNair: Part of it is the format those data are supplied in, so it can be used effectively.

Sarah Lock: That would be my point: I think foundations would want to comply as much as they were able. It may be that you have a grading of data that is required, depending on the size of the foundation.

Q26 Richard Harrington: If possible, I would just like to move on to the kind of area where philanthropy meets capitalism, which has got a few trendy buzzwords like "philanthrocapitalism" and things. In practical terms, I just wondered what your view on it is. Is it just something that is a bit of a new fad, or do you feel, for example, that it competes with work that you do, when donors and foundations are putting money into businesses? They may be to make social returns rather than just financial returns, but they are commercial operations, or do you feel that there is plenty of space for both?

Sarah Lock: I would say there is plenty of space for both. That group of philanthropists you are talking about is not part of the ACF network. They tend to want to go it alone. I think that investing in businesses and getting economies up and running is exactly what is needed, alongside the traditional strengthening of public services.

Noshua Watson: I was going to say that there are already massive streams of nonphilanthropic funding that influence international development-microfinance, remittances, foreign direct investment. It is not surprising that foundations choose to invest in, say, small businesses, small- to medium-sized enterprises, microenterprises or commercial ventures in general abroad in order to boost economic development or other dimensions of wellbeing.

I presume you are referring to venture philanthropy specifically. I think that it is one of many ways that foundations are experimenting with funding other organisations. They already provide loans and guarantees. They fund investments, take equity stakes and so on. I think that venture philanthropy is still very young and it still seems to be very domestically focused in terms of what it is that they are trying to do. For example, Bridges Ventures here in the UK is certainly innovating with respect to the funding of domestic issues like reducing recidivism at Peterborough Prison. They have invested in social impact bonds to do so. There may be a misalignment perhaps in the values or some of the objectives, but it is also a great source of innovation.

Q27 Richard Harrington: To use your example of the prison, the idea being to make money for the Portland Trust and hopefully to do good work as well, there is no income capability there, but most of these operations I can see overseas are basically lowoverhead operations. They are effectively saying they are not going to have field offices and a whole network of the machinery of what they now think NGOs do, but are going to put it into a slick, new, ultramodern virtual operation where basically they give the money on a semirisk basis and leave it to them. Do you feel that could cause tension with normal fieldwork?

Noshua Watson: What you find is that approach you describe has not been very successful. If you compare what has happened with Google.org with, say, Acumen Fund, where they actually do engage closely with entrepreneurs on the ground, what you are describing is setting up the venture philanthropists themselves for failure.

Q28 Richard Harrington: Do you feel that the network of foundations can avoid some of the criticism of original Government and multilateral operations, like the United Nations and many Government organisations, which are perceived as being very highoverhead and very bureaucratic, or do you just not think in those terms? It is perfectly legitimate not to.

Sarah Lock: We have never really thought in those terms but, yes, I would say that our running costs are much lower. We do not have huge amounts of bureaucracy and red tape. As we said before, it enables us to move much more quickly. Because of our size, I do not think we are ever going to need that kind of overhead. It is very different.

Q29 Chair: Dr Watson, on the Bellagio Initiative, which is pulling together foundations and evaluating them and, indeed, producing a map, can you briefly say, first of all, what the objective of this initiative is, how it is going to report and who it is trying to influence. Is it the foundations that are taking part? Is it public agencies? Is it the wider public?

Noshua Watson: The objective is to be able to make strategic recommendations to the philanthropic sector. However, we are trying to engage groups of people around the world, across social classes. We have had consultations with cattle herders in Kenya and with academics in London, but we are also trying to bring together people from Government, donor agencies, NGOs and foundations in order to look at the ecosystem. Philanthropy and foundations are one part of the international development ecosystem, and I think it would be unreasonable for us to make strategic recommendations without taking that into account.

Q30 Chair: That implies that you are looking to try to ensure that you fit in, in a comfortable way, rather than stand aside. You look at what the public agencies are doing and see how you can complement them and reinforce them in your own terms.

Noshua Watson: One of the main findings of the consultations we have had so far is the need for co-ordination. People feel that global governance has failed them with respect to climate change, food prices, mobility among countries and so on. People see the extent to which philanthropies within a global system of global governance can help generate co-ordination on these issues as the solution to some of these issues.

Chair: Thank you all very much for coming in. We have the opportunity with our second set of witnesses to talk to a couple of foundations and find out what they do. That might very well complement what you have said. If you have any reflections after this of anything you think we have missed or want to pick up, please feel free to get back in touch with us and pass on any additional thoughts. Thank you all very much indeed.

Examination of Witnesses

Witnesses: Sir Ian Wood, Chairman, the Wood Family Trust, and Peter McDermott, Managing Director, Children’s Investment Fund Foundation, gave evidence.

Q31 Chair: First, thank you very much for coming in to give evidence to the Committee. I wonder if I could just ask you to introduce yourselves for the record, and then we can cut to the chase.

Sir Ian Wood: Ian Wood. I guess in my normal life I am chairman of the company called John Wood plc involved in the oil and gas industry, but today I am chairman of the Wood Family Trust, which I will tell you a little bit more about shortly.

Peter McDermott: Morning, sir, and the Committee. Pete McDermott, managing director of the Children’s Investment Fund Foundation, based here in London, sitting in for our CEO Jamie Cooper-Hohn who is travelling overseas.

Q32 Chair: Thank you very much. May I say, on a personal basis, Sir Ian, it is nice to see you in front of the Committee? You are a local notquite constituent but near. What we are doing is looking at the role of what we are calling "private foundations", not purely in the American sense but foundations that are funded through private money and have their own objectives. We are trying to explore what they bring to development, how they work, how they interact with the public agencies, the issues that might arise, what scope there is for co-operation and also the advantage of keeping things separate as well. I wonder perhaps if you can tell us something about your foundations, so that the Committee has the context.

Sir Ian Wood: On this occasion, we are definitely the smaller player. I appreciate very much the opportunity. The Wood Family Trust Africa, in this case, is relatively new. It was set up in 2008. It has about £40 million of funds and is focused very much on subSaharan Africa. The funds effectively came from the Wood family share in, as I mentioned, a company called John Wood Group plc, which covers 50 countries and has 35,000 people around the world. I guess the motivation quite simply was, as an oil and gas business, we had significant benefit from the global opportunities. We had become a global company and we had pursued a number of opportunities in Africa. The family really believes we have a genuine responsibility for our fellow man. We felt Africa for a number of reasons, not just because we had worked there but, from our general knowledge, was an area in which we could make some impact.

We are probably a little bit unusual, in a number of ways, as a trust. I gave you an indication of our size. We have some further funds related to the UK, but the £40 million is related to Africa. Essentially, our focus is on economic activity and employment. Our headline is "making markets work for the poor". I guess we could be called venture philanthropists. We work directly for the private sector; we do not give grants to NGOs. We are very businessorientated in our approach. We are very implementationorientated in our approach. We have pretty strong views and an awful lot of work is done by very gifted consultants in analysing all kinds of things, but a lot of it is left hanging in air; there is not enough ability to implement. We have a very strong team on the ground and I think we are good at implementing.

I guess what differentiates us is highquality people. They are on the ground. We can do things quickly; we are flexible, which is essential in the environment we are working in. So many unexpected issues can arise as you are implementing and developing projects. There are so many different interests that you have to understand and take account of, so we believe flexibility is very important. We very much do things the local cultural way. We recognise we will only help to effect change by working with the local private sector. We are strong with implementation and we work in partnership with others. We have two significant projects. We have tried very hard to ensure that we understand what other donors are doing in that area. We have actually partnered with another major donor to do it.

The two projects we have will be about $18 million over five years-Tanzania and Rwanda. Both are focused on the tea industry, which we chose because it has a lot of potential in both countries. It is way behind in a whole range of ways. Our prime focus is the smallholder farmer, who we believe is absolutely at the bottom of the economic pile in the industry, where the primary producer in fact should be in a much more important position. Our focus is very much on trying to support them, and what I want to get across is that we are at the coal face. In terms of talking about the relationship with DFID, we are very much an implementer at the coal face. We are dealing with smallholder farmers who have no education; they have no commercial knowledge or ability to negotiate. They are very short-term in their thinking. Farming is a way of life, not a business, so they do not have a business approach to what they do. We try to work with them and the other players in the industry, including, in both countries, the industry associations and, to some extent, the Government to do a whole range of very basic things.

In Tanzania, we have been going for about two years. There are some signs of success. We are looking to significantly improve yields and significantly improve the quality of smallholder associations-the representative bodies that are meant to look after the smallholders-I try to choose my words carefully. We have made some real progress on marketbased pricing and trying to get the smallholder farmer a fairer share of what is happening. Hopefully in Rwanda, we may get into a position where we can achieve the smallholder having some serious investment in the factories. The key thing is the other major players in the factory: when I say they operate monopolies they do not do it intentionally but they are monopolies.

There is one factory that covers a large region, so the smallholder farmers are very dependent on that one factory and their relationship with it. That part of the private sector, which is sophisticated and knows what it is doing generally consists of good people, but they have to be encouraged to do what they can to help the smallholder. Working down with the smallholder, using our knowledge and business expertise, I feel will make a difference in these areas. The prime interest is to at least double the income of smallholder farmers who are below the breadline over the next two or three years.

Q33 Chair: Thank you for that. A number of us had the benefit of a presentation from Jo Mackie when we were in Aberdeen, which we thought was quite inspirational and very practical.

Sir Ian Wood: She did it much more eloquently than I have done it.

Q34 Chair: No, not at all; thank you very much for that. Peter McDermott.

Peter McDermott: Thank you, sir. If I may, I will maybe just categorise this with a little bit of background and a couple of the core principles and then primary areas of focus. That might be a way to structure this. The Children’s Investment Fund Foundation is a unique model, as you know from the written presentation. We are linked to a hedge fund and the funds accrue to the Foundation intentionally. You do not get many hedge funds called the Children’s Investment Fund, but it was a vehicle that provides additional funding to development from a nontaxpayer source. That was the intent.

The mission is very clear: demonstrable impact for children living in poverty with key principles of scale, sustainability and impact. Our asset base, as you probably know, has grown significantly and this has resulted in CIFF also changing quite significantly. In 2004, when it was set up, the aspiration was to have a cash endowment of around £10 million. As of this year, markets apart this week, we are about £1.7 billion, about $3 billion. That has resulted in a number of strategic shifts. When I joined the foundation as a managing director three and a half years ago there were three staff; we are currently about 40. We were working in a limited number of countries in Africa and a couple of states in India. We are now much more expansive globally. Also, we have gone from really what would have been regarded as an NGO support project foundation to a programme of co-operation, which is much more based on working with national Governments at scale in their countries, aligned to their country programmes.

We have been through a series of significant strategy shifts over the last four or five years. Originally, we had the very traditional sector approach to health, education, water sanitation, etc. We have now, at the real direction and push of our board, been focusing more and more on what is the evidence for children, what do we know that works and what are the highburden areas where children are affected to try to focus CIFF’s interventions. Initially, after a period of about a year of research and discussion with our board and peer advisory groups, CIFF’s board asked us to focus on seven areas related to children, but also stipulated that, until CIFF had more experience of working on the ground with Governments, it would like us to focus on only three of those in the first instance: child survival, education attainment, and nutrition and hunger alleviation. They are the guiding priority impact areas for us currently.

It is not sufficient to focus from 35 areas to seven, and then to three, so the board has asked us within those three areas-child survival, nutrition and education-to select a certain number of what we would call internally, rather crudely, "superpriority areas". That is some of the unfinished business around PMTCT paediatrics, which has been an early area for the Children’s Investment Fund to focus on. As you know, there has been a significant and dramatic decrease in child mortality and underfive mortality over the last decade, but in neonatal mortality-the first week and the first 28 days-we have seen very limited reduction, so we are focusing very specifically there.

On education, we are looking less at increasing access to education, where we think again there has been tremendous global progress, notwithstanding some rather major inequalities, to looking much more at children learning and whether children are fit for purpose for learning. We are looking at the years from three to six, and the preprimary and primary areas for learning. We are looking specifically at the moment-having just signed a major co-operation agreement with the Government of Kenya-around deworming and not just routine deworming, but to see if we can drive down soiltransmitted helminths to a control level that then can be affordable for longterm maintenance. The last area of focus, which is currently one of our greatest preoccupations, is to see if we can work to alleviate the large amount of childhood severe acute malnutrition, which is killing millions of children unnecessarily in this day and age. If I may leave it there, sir, I am happy to elaborate.

Chair: What we would be interested to explore is something of the engagement or otherwise with DFID.

Q35 Mr McCann: Thanks, Chair. Can I perhaps direct my first question to Mr McDermott, because CIFF’s written submission said that DFID had helped guide your strategies and has provided technical support? I was wondering if you could just give us some practical examples of how that has worked.

Peter McDermott: Yes, I am happy to. Over the years, we have worked with DFID primarily at two levels: here in London at the strategic and technical thought level; and then more specifically at country level. We have had a lot of conversations with DFID, from the current and previous Secretaries of State to Permanent Secretaries and senior management team. At the technical level in our areas-child survival, nutrition and the private sector group in particular-we have had a lot of discussions. A couple of weeks ago, the incoming Permanent Secretary spent a morning at CIFF presenting to staff and further exploring how we can co-operate or collaborate together. There is that generic issue. More specifically, as CIFF has developed its understanding of the priority areas where we work, many of the DFID staff have been technical review and peer review people for our strategies, and have provided a lot of good technical input into those areas.

At country level, I can give probably three case examples, if that is appropriate, of very specific issues. I think the work in Zimbabwe has been exemplary. It is clear to us that, if it were not for DFID, the Children’s Investment Fund would not have made the recent $50 million investment in Zimbabwe. They provided us both with the political knowhow and political understanding of working in a very different and complex situation and, secondly on a technical level, really the CIFF investment, although the entry point is mothertochild transmission, is really a healthsystem strengthening, looking at training, supplies, management, systems and processes of keeping a health sector that had really fallen apart going. If it were not for the prior investments of DFID and USAID, CIFF would not have been able to navigate that very political situation. We have aligned our planning cycles. We share information on how we are doing. It is a very good example of collaboration, and I would like to go on record as saying how important that has been for CIFF.

In India similarly-I have just come back from a week in India-we have had a number of discussions with DFID. We collaborate very closely in one of the poorest states where DFID has a focus area, and CIFF’s intervention there, along with the Gates, is in the treatment of childhood diarrhoea, which is one of the main killers in that state.

Q36 Mr McCann: Which state is that?

Peter McDermott: Bihar.

Mr McCann: We visited it earlier in the year.

Peter McDermott: In Bihar, we based the programme out of Patna. We have just undertaken, while I was in India last week, the annual review for that programme in our first year of operation. The Gates Foundation is working on the private sector for diarrhoea. CIFF is supporting the Government of Bihar in the public sector and, again, DFID has provided a real chapeau around the healthservices strengthening in that state, so there is a good alignment.

The third area where we have had a very good recent relationship with DFID is in our work with the Government of Ghana, where we have started a randomised control trial to improve educational outcomes for children in Ghana. Again, DFID’s longstanding support for the education sector in Ghana has helped us to navigate entry into that country. There are a number of other countries I could happily give evidence of, but they are the ones that are most pertinent.

Q37 Mr McCann: Can I ask both organisations, perhaps starting with Sir Ian, about some of the practical relationships with DFID? For example, do you have a main contact either in the London office or indeed in the East Kilbride office, which is dear to me because it is in the heart of my constituency? Is there any way that the relationship could improve? For example, would it benefit from having a larger team allocated to dealing with your organisations? Would it be better if there were special events for foundations? Importantly, is there anything that DFID could learn from your organisations that you believe could help them in terms of the general development work that they do?

Sir Ian Wood: I think we are very different from CIFF in a range of ways, in terms of our potential to work closely with DFID. It is fair to say two things upfront. DFID is generally recognised as one of the better, if not one of the best, bilateral organisations-that is just generally from listening and hearing. Our experience would tend to back that up, but we do not do a lot with DFID. For example, in both our countries, Tanzania and Rwanda, we have contact with DFID. They know that we are there; they know what we are trying to do. Frankly, there is not much they can do to help us.

I guess if we have any frustration, we see DFID as a very strong funding company. They do not have a lot of people in terms of the programme that they are trying to implement. They have a lot of partners and subcontractors. We have had preliminary discussions in one or two areas of trying to work with them, because we are very complementary. We are a coalface implementer and they are the effective Government funding body that disburses funds for a whole range of things. They work at a very much higher level-they are at the Government influential level-and that is very important; we recognise that role.

We have had the discussion about whether we can do things together, and I outlined earlier what our differentiation is. I would never say we are going to be successful. So many different things can go wrong in terms of the projects we are working on, but I think we are having some reasonable success up to this stage. I think it is based on our differentiation, on our ability to move quickly, make decisions quickly and all the things I outlined. Frankly, we could not marry that into the kind of structure that DFID works with, in terms of trying to say this is a project; we all agree it is a good project; we should try to do this project; it fits our bill, which is employment and making markets work for the poor. When we tried to say, "Can we actually do that? It is your Challenge Fund programme", we just felt we could not operate.

Q38 Mr McCann: We are aware that, for example in India, DFID is putting far more money into private propoor initiatives, seeking to build up the private sector, which ties in with what you have explained your organisation does in relation to Tanzania and other areas. Is there any potential tieup for that in future or do you still think it will be separate?

Sir Ian Wood: I do not believe the door should in any way be closed. We have a good relationship. Jo Mackie, who is behind me, has got fairly constant contact with DFID. At this stage, we have accepted the understandable regulations, restrictions and constraints that they work under as a Government body, and with all the issues on the politics and other issues, the only way we could work is if we agreed this is the project, this is the outcome, this is the way we are going to do it, so that is it. We will provide X funding and they will provide X funding and they simply let us get on with it. We have not been able to get that model.

Q39 Chair: Is that not precisely what Mr McCann is trying to get at? Your own business, your background, is as an experienced businessman in an experienced business organisation with a probusiness attitude, which is not actually very strongly built into the DFID culture. If they are going to put more money into private sector development, is it not precisely your kind of organisation that they need to partner?

Sir Ian Wood: We would love to see that if we could find a way to meet your requirements that Parliament sets understandably for DFID, and also at the same time does not overconstrain. One reason we have been successful is we can change and do things very quickly. That is just a fact. There are so many unexpected things that go wrong, way beyond what you expect in business in a number of other places in the world. There are so many diverse interests. We have a very highquality team. It is not me, Malcolm; we have some very good people on the ground and they have got the ability to change very quickly. We can provide that part of the equation if you, working with DFID, can give us a position with which we can have the proper kind of legal, properly regulated relationship that in fact does not constrain us doing what we are good at doing.

Q40 Pauline Latham: You are saying they are too stifling, because they have to be so accountable, so they cannot let you just get on with it.

Sir Ian Wood: Exactly, yes. DFID has got some very good people. I have met three or four and there are some very good people at DFID, but they are not set up to be an implementer. They are largely a funder working with a number of other people. It would be a very good marriage if we could find a formula, not just to work with us, but to work with a number of other similar organisations with our implementation strength.

Q41 Chair: That is precisely what we are trying to get at.

Peter McDermott: If I may just elaborate on that, I do think it is about defining what the additional valueadd is for both groups: the generic co-ordination, consultation, collaboration. At CIFF, we have a very small staff. Most of it is focused on governments and country programmes. If we are to divert a lot of attention to consultation here in London, DFID really needs to demonstrate the additionality that it can move things. That is one thing. Secondly, there is an element of being typecast. A lot of our discussions in DFID at the central level are with the private sector. We try, as a children’s investment fund, to marry the best of business to the best development. We think that there is something unique in that mix of skills that can give us better value for money and results, but I also think that we should not try to force or forge unnecessary consultation or collaboration where it really is not proven.

DFID has been very gracious to CIFF. We are young and somewhat unknown. People probably do not understand the depth of the technical competence that we have built up, but we have been invited to participate in some of the GAVI work that DFID has undertaken. Some of CIFF’s staff have been involved in the bilateral reviews and we really welcome those opportunities to learn. We have a very progressive relationship with the India country team, where we are looking very specifically at what we can learn from each other’s methods and modalities of working in India. Can we borrow from DFID? DFID is quite openly saying, "Can we borrow from some of CIFF’s experience there?" I also think we are probably not yet maximising the synergies between the two organisations. That is an aspiration on both our parts, but what precisely that is we are still struggling to define.

Q42 Anas Sarwar: I was trying to follow on the point you made about how DFID has forged quite a good relationship with you, even though it is quite a young organisation. How easy did you find it as an organisation to find a route into DFID, and what more could DFID be doing to identify organisations where they are just starting up or are young to build relationships with?

Peter McDermott: Part of that question is that DFID itself is not a homogenous entity, either at country level or here in London, so it is about navigating what part. We work from the Secretary of State/PS level down, and say, "Where you would like us to fit into the organisation?" We found it much more successful working at country level and working backwards. We have just had a fourperson team from the Children’s Investment Fund in northern Nigeria, building on a DFIDled nutrition programme there and then backstopping that to London.

Navigating DFID has been difficult, especially given the changes DFID itself has gone through in the last couple of years: major reorganisation, major bilateral and multilateral review, major downsizing in staff. Their own internal capacity, given those internal management reorganisations, to engage externally has been a little compromised. The lack of staff on some of the areas now is beginning to show. As we move forward, with Mark Lowcock coming in last week, we are trying to navigate both a strategic relationship and a programmatic relationship. Unfortunately, it is a little too early to tell any more detail on that.

Q43 Anas Sarwar: From your response, Mr McDermott, it is clear that you have the skills in the organisation to identify the people you need to engage with, whether it is in-country or the more centralised organisation of DFID. For those organisations that do not have that expertise, do you think it would be quite hard to find that route into DFID and build that relationship?

Peter McDermott: I may not be the best person to comment on that, but I think that DFID has a longstanding partnership outreach programme. From my previous experience in the UN and running NGOs here in the UK, DFID has very sophisticated partnership modalities with NGOs and partners. I think it is probably with the newer beasts like the private foundations that it is a little bit more challenging than for some of the traditional members.

Q44 Chris White: Mr McDermott, you have described very well a very lean organisation. You have articulated in your last couple of answers that you do not like meetings for meetings’ sake.

Peter McDermott: Apart from this one.

Chris White: I applaud your views on that, but again a meeting for a meeting’s sake would be about transparency and how transparent both your organisations are. Would you give me your views on that?

Peter McDermott: That is actually a very pertinent and appropriate question for foundations, as was some of the discussion in the earlier session. From the Children’s Investment Fund, a couple of points: one is we meet the Charity Commission regularly, even at our request, not just at their request, to seek their guidance. We do file all of our projects with the Charity Commission at Companies House, and we really do believe in full transparency. We also issue an annual report, where every project or funding for those projects is outlined. The board, as we move forward, is pushing us to be even more transparent. As we begin to develop a body of programmes, and as we come to closure and see the results of those programmes-what we have learned, what has succeeded, where we have failed, and we have failed in a number of areas-what we have learned will go up on the website in a more expeditious manner. The issue of transparency and accountability is a germane issue for foundations like ourselves, and we welcome the engagement of the Charity Commission and many of our peers in this area to learn what more we can do in that area.

Sir Ian Wood: It is really difficult to add a lot more, because we do not have a lot of a relationship with DFID. Our relationship as such is in-country. I do not think we have a significant relationship with London. We have had some contact, but I think it has been quite sporadic. It is very much in-country. There is open communication; I do not think we ever feel that DFID is holding back from telling us things. Communication, contacts and relationships are important, and DFID has got a lot of these in-country. That may be part of the answer to the question of helping new people. A key thing is a new person going to any of the main countries should go to DFID as one of the first contacts. DFID generally we have found very open, very helpful and very keen to give guidance. Then there is the whole issue of the Government relationship, which is extremely challenging in different countries. Again, there is benefit there. Those are the kinds of benefits we have had from them.

Q45 Chris White: Just a couple more issues: are you both aware of the International Aid Transparency Initiative?

Peter McDermott: We are aware of it, yes. We are looking at that and also some of the issues around the OECD, which came up earlier, and also the Paris Declaration and what is good donor practice and how much of that does, and does not, apply to foundations. As we develop our portfolio and as we grow slightly more mature as a foundation-we are so young-clearly those are initiatives that we would like to try to make sure that we subscribe to. The second point on this is: who primarily, going forward, does CIFF itself hold itself accountable to? We have our board of trustees, the advisory panels we set up for our programmatic areas and peer review mechanisms, but ultimately we have just come back from a week in, Nigeria, a week in Ethiopia and a week in India. It is with the Ministries of Health or of Education, the Governments of those countries and the sector plans that we are seeking to align ourselves with that we feel are our primary areas of focus for accountability, because ultimately our assistance is to help Governments help children in their countries.

Q46 Chris White: Thank you for that answer. Finally, any further advice to DFID in terms of how they could help organisations such as yours improve transparency and accountability?

Sir Ian Wood: I think "advice" is probably the wrong word. In terms of looking to develop their strategy, there would be real benefits and both sides would be as transparent as necessary, in trying to link into implementing organisations. Our headline surprise comment on getting involved in Africa was how many projects failed after a fair bit of money has been spent on them. When you look into it, there is a massive amount of analysis and investigation. There are books this high produced by consultants. If you can even begin to wade through 10% of it, all the answers are probably there somewhere, but no one has done anything about it. I think what is missing in terms of what we are trying to do, which is to create employment and help people to help themselves, is implementation.

Peter McDermott: Let me just echo that. The greatest challenge is accountability for results, not accountability for process.

Q47 Jeremy Lefroy: Precisely: how do you in your organisations measure results? How do you evaluate what you are doing?

Peter McDermott: You probably know; our reputation may precede us. We are singularly fixated on data and measurement. It is one of the business practices that we like to bring to development. We think that there has been too little accountability for results and, in fact, we think there has been too little design for results. As a pithy statement, we do not accept that passion and activity equals impact. For us if we were running, as many of our board members are, multinational financial institutions, data is everything. If you cannot measure it, it does not count basically. We start from the premise of what is a very clear definition of success and then work backwards.

We have two or three tools for that. One is what we call a logical framework or critical path, but what are the four or five barriers that we need to overcome to make the difference? Secondly, do we have an understanding of what the cost structures are according to different scenarios to get there, because context is all in many of these countries? The third point is: do we have the data to make intelligent decisions, both to continue the project but also, somewhat surprisingly in this business, to close projects down if we do not think they are on track to make an impact? We spend about 5% to 10% of our programme on monitoring and evaluation. We have a very sophisticated what we call "fitforpurpose measurement framework", depending on whether we are trying to design a proof of concept, which may mean something as advanced as a randomised control trial or proof of feasibility. Can you take an intervention and scale it up without a dilution effect? We take data measurement and evaluation. Most of our bigger programmes are thirdparty evaluated.

Sir Ian Wood: One of the key parts of venture philanthropy is very much measurement and evaluation. One of the things that naturally attracted me and some of my colleagues is that, effectively, we are working now with businesses where we can measure. Our key programmes’ yields and productivity, we can measure them monthly in terms of the smallholder farmer. The smallholder associations and the performance of the smallholder tea associations have a whole range of different measures that have been instituted there. Again, we get feedback on that. Marketbased pricing-I am not going to say it too loudly-has been a real success in Tanzania with a fairly significant increase in a formula marketbase pricing, which has resulted in X amount of increased income to the smallholder farmers immediately. Then we have a programme of innovation grants, where we largely give the grant to the factory owner, but again they are based on the factory owner doing a whole lot of things for the smallholder farmer. Again, we can measure that. Frankly, it is one of the most satisfying things among a lot of very challenging things we are now doing: we have a very good handle on measurement.

Q48 Chair: Do you have an endgame, in the sense that, at some point or other, you will say, "We have added value. We have improved their practices. We have got the relationships right. We can now move on"? Can you do it knowing that you have left something behind that will continue to function after you have left?

Sir Ian Wood: I really hope that is what will happen. I am very reserved talking about things going well, because I have just seen so many other unexpected things happen. Absolutely, we are much further ahead in Tanzania though we are still at an early stage. We have a sixyear programme. We are working with Gatsby and Sainsbury, who are very good partners to work with. That programme has a sixyear life. We have set a whole bunch of objectives at the end of those six years as to what we feel we should achieve, what is reasonable to achieve. At that stage, the natural thing would be to have a smallholder farmer population-there are 30,000 in Tanzania and also 30,000 in Rwanda, which by the way is about 100,000 people in terms of dependents-in a significantly better measurable position in terms of their annual income to be better farmers and actually see farming as a business as opposed to a way of life, and look after themselves and their family. The answer is absolutely yes; we hope to be able to do that.

There is a little chink of positive light appearing in one area, where it may be that we can significantly enhance smallholder ownership in a factory. That would be an important step. That opens a bit of a new door that might prolong the programme a bit, if we can begin to move down that road. Yes, we absolutely have a timetable on that.

Peter McDermott: If I may just elaborate and give an example, a slightly different one: in the early days of our HIV/AIDS work, one of the biggest concerns for the Children’s Investment Fund was that fewer than 10,000 children of the well over 2.5 million who were infected were on antiretroviral treatment. For many years, the Children’s Investment Fund Foundation was the largest donor to the Clinton Health Access Initiative or CHAI. When we started on paediatric HIV/AIDS, it cost $1,500 per child per year for treatment. Looking at markets, looking at the active ingredients, going to India, China, doing some re-engineering, getting the generic drug markets moving on this with UNITAID and the Clinton Foundation, the current cost per child is less than $50. We transformed aid effectiveness in terms of reducing costs.

Two other barriers have now come into play around the drugs. One is how you prevent children getting AIDS in the first place. As Pauline knows from much of her work on this, we have the technology, the drugs and the programmatic knowhow to reduce infections quite considerably, but for many years we have been using the wrong drug. We are now moving on that. The second barrier is that we had no pointofcare diagnostic. You had to take the blood of the child, send it to the capital city. The results may or may not come back. You have lost the child. We have just invested in Dr Lee’s outfit up in the University of Cambridge to try to bring to market a new technology so that, at the health centre, we would be able to do a test for children with HIV/AIDS within an hour and a half, therefore cutting out the transportation, cutting out the wasted time. That innovation-looking at markets and trying to bring them to work for children-to exemplify and elaborate on what Sir Ian said, are some of the areas where foundations have specific innovative niches and the flexibility of funding that many of the traditional partners perhaps do not have.

Q49 Jeremy Lefroy: Sir Ian, if I may just take up something from your answer, I am absolutely delighted that your foundation is concentrating on smallholder agriculture, which DFID is beginning to realise is extremely important. My first question, as a followup, was to ask whether you were thinking about perhaps, given DFID’s interest in this area, working more closely with them or at least advising them of your results and experience in this particular area, because I think it could be extremely helpful for them. Secondly, does your evaluation so far lead you to believe that, in future, you could perhaps have a wider involvement in the smallholder agriculture sector? I am particularly thinking that, to date, such involvement across the board has tended to be more in cash crops, less in food crops or more mixed agricultural environments. A number of us feel that this is such an important area and that it needs specialised work, such as the work that you are doing, but wider than just in cash crops.

Ian Wood: I am frankly not sure when our last substantial discussion was with DFID. We were aware of the growing interest in smallholder agriculture and we will pick it up pretty urgently and make sure we have it right. A lot of the contact takes place in-country, in Tanzania, Rwanda and also in Kenya, where we have quite a strong presence. We will absolutely pick that up. What we have aimed to do is start one new project per annum.

We have two projects in the tea industry. We are just now beginning to think about a third project. Not just because you say that is what you wanted, but we are very much focused on developing the food sector, both what is called the food crop and the cash crop. The food crop is what the family eats and the cash crop is where they can actually get some money and put their children in school. There is a lot of potential. What we have found in the smallholder farmer varies between countries; some countries are quite different, and the smallholder farmers are very well organised. Kenya is the best example. They are a real exemplar in terms of the way that smallholder farmers have got a real stake in the industry. In other countries, what we found in tea also exists in a whole range of other industries: that the smallholder farmer generally is at the bottom of the pile.

Q50 Jeremy Lefroy: Just one final thing: it is quite clear that water is a major problem for smallholder farmers. A lot of the larger farmers are now moving towards techniques such as drip irrigation. I have seen that. I wondered if you have been looking at that, because it often seems that there are systems that are quite suitable for smallholder farmers but they do not have access to them, whether because of finance or simply because the technology is not available locally.

Ian Wood: Rather than directly investing in the infrastructure, part of our innovation programme for factories is to try to encourage them to make investment, with us putting in normally at least 50% of the funds required. Frankly, they can exercise much better judgment as to where there may be water issues and problems. We would prefer in that case to work with them. That is just one of many problems that need to be tackled. One of the big decisions we made early on was that we could not begin to try to put a whole bunch of people in to try to help, so we are using the factories that are on the spot. We are very knowledgeable, very sophisticated and also using the farming associations, although there is a lot of work to be done with the farming associations.

Q51 Pauline Latham: I was just going to come back on HIV/AIDS. Jeremy and I went with SABMiller to look at how they deal with HIV/AIDS. They start with their own factory, and they look after all the people who work there and provide the drugs free. Then they go out to the whole families, but they also go out to the sex workers in the bars; they go out to their farmers and provide the drugs for them as well, and even offer the drivers testing and try to get them on board. They are working from their own factory and moving out, which, with the cost of the drugs that you have now managed to get, seems a very efficient way. I was just wondering if your tea factory could perhaps operate with the farmers that you are working with, Sir Ian-all of those people. If you have a healthy workforce, you get a better product because they are not off sick all the time. It seems that the factory, in the case of SABMiller, is the conduit through which it goes. They facilitate it and they spend a lot of their own money on it, which is a really good way for an organisation that is making money putting something back into their workforce. I wondered if the two of you could work together, because one is interested in HIV/AIDS and you have access to factories. You could combine the two to look at how those tea farmers in Tanzania and Rwanda could perhaps benefit from those resources that are available, at a much reduced cost.

Ian Wood: It is something we will discuss. What I have found very encouraging is the level of networking and communication between UK donors. For example, we have met the CIFF principals two or three different times and had some very helpful discussion with them and a lot of very helpful advice from them. Generally, it is good and strong. I have yet to find anyone we have made contact with in the UK, as a UK donor, to say, "Look, can you give us some help and advice on this?" who has not gladly said, "Yes, of course we will do that." Of course, we are now trying to reciprocate that, so we will pick up on that.

Q52 Pauline Latham: Is that something you think DFID could facilitate, by bringing people together for things, or do you think it is something that you just do because you meet people at different events?

Ian Wood: I think it is happening. Significantly, where it makes sense to happen, it is happening. People are very pleased to talk to each other, learn from each other and help each other. We all have the same objective. There is no difference in that at all.

Q53 Mr McCann: The final question that I have is on highprofile advocates. We all know that Bob Geldof and Bono will heighten the profile of issues, and they will also perhaps get younger people involved in campaigns. The other side will be the irritation factor of a multimillionaire musician lecturing us that we should all be giving more money to causes around the globe. I just wonder what contribution you think highprofile advocates make. Leaving aside the whole celebrity side of it, if you have someone like the philanthropist Bill Gates, who was very much behind the GAVI initiative and the enormous sums of money that DFID put into that project-close to £1 billion each time-I wonder in terms of his involvement and highprofile role, did that have a positive influence? Was that the right decision; did perhaps the fact that he was a celebrity and highprofile allow him to give the GAVI initiative a higher profile and, in turn, it received more money? Is that a good or a bad thing? That was a big round ball of a question there, but I pass it over to you.

Ian Wood: I have very clear views on that. There are undoubtedly risks in getting highprofile personalities involved in these kinds of projects. A number of highprofile personalities are extraordinarily gifted and good at what they do, but they are highly individualistic. I actually think that is vastly outweighed, particularly with young people, by the impact of personalities. I was doing something recently and Alex Ferguson got involved. It all changed. It is just amazing how for young people in particular good, well-known personalities have a huge impact.

In terms of awareness, part of our UK programme is trying to get young people in the UK to better understand what is happening in countries like Africa, because that must be part of the future solution as well: to have a lot better appreciation of what is happening. I know they see it on TV, but it somehow does not work. It is actually giving some of them a better understanding. It just takes a Bob Geldof or whoever the equivalent is in modern times to show a real interest. It is worth 10,000 times what Ian Wood could do standing up and making a speech somewhere. From that point of view, in terms of communication, trying to marshal public opinion, trying to get people, particularly young people, thinking about this as our problem-not "it is somebody else’s problem" but "we have to help in this problem"-we have to try to guide and make the best of that. Bill Gates, frankly not just the money he’s given but his and his wife’s association, has been immensely valuable.

Peter McDermott: Let me echo that. Without a doubt, the Gates Foundation and Bill and Melinda themselves have led the resurgence on global health and vaccination, which has to be one of the most dramatic costeffective interventions for children globally, and not just with the existing vaccines but bringing new vaccines for pneumonia and diarrhoea to the market. Clearly there are concerns about how they fit into-I think the word this morning was-the ecosystem of development and the context.

From a CIFF perspective, I think there are two issues. One is we do not fundraise, and so we have no public profile. We intentionally do not have a communication unit. We try to keep below the radar. Our work is to support Governments and others to support their children, so we have a very different perspective. Having said that, whether you are trying to generate political will, to get global policy change, to increase funding and support for development, or to mobilise civil society to hold Governments accountable for how they use money, there are many reasons why you can use someone who is highprofile. Within CIFF, we do try to use advocacy as a tool, but we are actually investing quite a lot of thought time and funding at the moment in how you measure advocacy and how you know that all the noise, all the celebrity, all the media and all the mobilisation are actually giving you the results that you need for your programmes. We are taking a slightly different slant on that, but let me just say that we welcome the role of Gates and others who are responsible and appropriate in the market.

Q54 Chair: Doesn’t the existence of private foundations and the advocacy of celebrities give some kind of counterbalance to the critics of aid and development assistance? The fact that you, Sir Ian, as a very successful businessman, want to do this and want to use your business expertise to make it work gives some kind of, if I can put it this way, economic respectability to aid, which some people just think is handouts. You are actually demonstrating that it is something different.

Ian Wood: I honestly have not thought of it from that point of view. I just think I have been part of a very lucky generation-you have heard me say this before, Malcolm-in North Sea oil, and I have seen what is happening around the world. Goodness me, we are all lucky enough to live on one planet for a short period of time. We should do anything we can to try to help what happens elsewhere on the planet. That is where I come from.

Chair: I could not ask for a more straightforward answer than that. Thank you, both of you, for coming in. You will appreciate that this was our first evidence session, in two parts, and we are exploring the role of private foundations and how they might complement DFID’s work. What I would say to you is that, if either of you, reflecting on what you have seen and heard, have anything you want to add-particularly perhaps on the relationship with DFID, because clearly that is of interest to us-we would be very happy to hear from you. We have taken on board the fact that there is scope for partnership, but you need freedom and flexibility, and they need accountability. What we may be looking for is how we can bridge that gap to get the money and expertise that DFID has working in a way that can achieve what you want, without getting in the way of your ability to do it in a flexible way. I do not know if we can give an answer to that. I think we have to explore, but thank you both very much. For me, and I hope for other members of the Committee, that was a really useful and interesting session.

Prepared 8th November 2011