Select Committee on European Communities Minutes of Evidence

Examination of witnesses (Questions 153 - 179)




  153.  Good morning. I think we have met Dr Reynolds before. Would you be kind enough to introduce all three of you and explain your functions?
  (Mr Coverdale)  I am Alan Coverdale. I head up a department in DFID called the Eastern Europe and Central Asia Department which is responsible for Knowhow Fund spending in Russia and the 11 other countries of the former Soviet Union and also for relations with the TACIS programme on behalf of the UK. Mark Lowcock, to my right, is head of our European Union Department in DFID and as such is responsible for overall DFID policy to the European Union. To my left is Dr Jamie Reynolds from the Department of Environment, Transport and the Regions. He is from the European Environment Division of that Department and is responsible for cooperation with the Central and Eastern Europe and NIS countries under the Environment for Europe framework and for the Department of the Environment's overall policy strategy and project development for environmental projects under the Knowhow Fund and the Environment Knowhow Fund. I should perhaps explain too that we wanted very much to bring our environment adviser from DFID along with us but he has the excellent alibi of being on honeymoon. We could not break that. In introducing Dr Reynolds, I wanted to emphasise that DFID has worked very closely with DETR on environmental questions in the transition countries and that has been a very productive working relationship. We have provided a memorandum to you.

  154.  Yes, an excellent memorandum. We are very grateful to you for that and we are delighted by its frankness which we do not always get from some government departments. It is very useful indeed and we are very grateful to you for the amount of work that must have gone into that. In response to your introduction, is it difficult for you, spread across two departments, to work in relation to such a complex area? How do you liaise with each other? It is a sort of divorce that you are working through, I suppose.
  (Mr Coverdale)  The division of labour I think so far has been quite clear and has worked. We were actually just discussing whether we should revisit it now in the light of the new strategies being pursued. The Department of Environment's interest has principally been twofold. First, in the fact that the Environment Knowhow Fund money has been DETR money and it suited DETR for DFID to administer that money and to handle the project management involved in that money, but there has been very close liaison on the strategic approaches and the choice of projects and all of that. The second element of our collaboration has been that DETR is very well informed on the wider framework on the Environment for Europe process and all of that, which is not a dimension that DFID attempts to follow very closely.
  (Dr Reynolds)  I would certainly agree with everything that Alan has said. The only other point I would add is that one of the characteristics of environmental policy is that it has a very significant, international dimension. It is very clear because of global and European regional environmental problems. The cooperation between all the countries of the European region is close and has developed over 20/25 years. The link between assistance—particularly assisting the Central European and NIS countries with their environmental problems—has to be closely integrated with that broader framework. That is why we collaborate closely.

  155.  DFID traditionally dealt mostly with the Third World, I think. It is only more recently perhaps that you have been involved with what are called the transition countries. Has it been easy to make that change in focus? How do you balance those two responsibilities: traditional Third World impoverished countries and countries with collapsing industries rather than industries that need nurturing?
  (Mr Coverdale)  Under the previous government, the Knowhow Fund programme was administered by a joint department which in some ways was a little detached from both departments because of that. Under the new administration, we have been brought under DFID and under a government with a very clear emphasis that the umbrella for the aid programme should be poverty reduction and an intention to increase the allocations to the poorest countries. I think for a little while the jury was out on the Knowhow Fund and on our work in the transition countries. As ministers and officials considered this question, they realised that in fact poverty is very widespread and very real within the transition countries. There is very considerable income poverty but there are also problems of increased inequality, poverty of access to rights and information, and there are real needs. Also, our work so far had a very high reputation and was well respected in these countries. Therefore, the decision was taken that we should continue to take an interest in these countries. In particular, we should continue with our Knowhow Fund programme of assistance, but with a significant change of emphasis towards seeking to ensure that the benefits of transition, when they come through, are spread through all levels of society and are sustainable. That last point has meant that we now place more emphasis on the environment.

  156.  According to the White Paper that came out at the end of last year, something like 30 per cent of UK development is now through the European Union rather than independent, bilateral aid. Is that a trend that you see continuing so that a greater proportion of our aid to developing countries is channelled through the European Union rather than things like the Knowhow Fund?
  (Mr Lowcock)  Our current forecast for the current financial year, 1998/99, is that about 34 per cent of DFID's total programme would be channelled through the EU. I would like to give you that figure with a health warning, if I may. It is quite difficult to forecast these figures because they depend on actual levels of spending in the EC, on changes in exchange rates and on variations in the UK's share of the total EC budget. That is our current forecast. In the medium term and the longer term, this ratio will depend on two things. Firstly, overall EU spending which is attributed to the DFID budget. Secondly, the overall DFID budget. On the first, EU spending on its external assistance programmes is set to continue to rise quite substantially over the medium term. That is partly because a decision taken in Edinburgh in 1992, under which the provision within the overall EU budget for external assistance programmes was increased by 180 per cent, has yet really to come through in a lot of spending. There is a backlog which needs to be caught up. It also arises on our current estimate from the likelihood that, for the budgetary framework that will be set for the first part of the next century, there may be further increases on the external assistance programmes of the EU. Whether this means that the share of the DFID budget going to the EU also increases depends obviously on the overall DFID budget, which is a matter at the moment for the Comprehensive Spending Review, on which we do not yet know the outcome.

  157.  Do you know what proportion is split between the old east European countries and the old Soviet Union countries and what goes to Europe or not?
  (Mr Lowcock)  Of the 30 per cent figure, about five percentage points goes to the Central and Eastern European countries and about two or three percentage points to the NIS. That means that, of the EU's overall spending on its external assistance programmes all over the world, about 15 per cent of the EU's money goes to the Central and Eastern Europeans and about seven or eight per cent currently to the NIS.

Lord Middleton

  158.  Mr Coverdale, your White Paper at paragraph 3(3) starts off, "Conservation and sustainable management of the environment are a corner stone of our approach to international development." Do you feel that there is a full understanding between the UK government and the Commission with regard to environmental programmes targeted at the NIS?
  (Mr Coverdale)  I think the answer to that is yes. The Commission has made a number of statements on various occasions which indicate that it recognises the importance of environmental issues and in particular the Amsterdam Treaty last year requires that environmental policies should be integrated into all other policies within the Commission, which includes its development programmes and includes TACIS. I think there is the framework there of commitment which is entirely satisfactory. It is nevertheless one of our objectives to encourage the Community to integrate environment and sustainable development into its policies and programmes and to press them quite hard on this to do it more and more in practice. In particular, we have used our present presidency to encourage more emphasis on the environment under the TACIS programme. European ministers at the Aarhus conference in June this year will invite the PHARE and TACIS programmes to play an increasingly important role in assisting countries in the region to implement the principles of the environmental action programmes for Central and Eastern Europe. There is quite a good umbrella but also quite a lot of action on our side to encourage good practice.


  159.  But initially the TACIS programme did not include the environment as one of its specific objectives. It is only in the last three years.
  (Mr Coverdale)  That is right.

  160.  It is rather an afterthought, in a way. At least that is how it looks.
  (Mr Coverdale)  I think it has been evolving, yes.

  161.  Although one says that sustainable development should be part of policies, we say that about our own policies, do we not, but it is rather lip service, is it not? Most departments are not terribly excited about environmental concerns or sustainable development. Is that unfair?
  (Mr Coverdale)  I think it is unfair with regard to DFID and the lessons of past development work, past aid work, when people have taken a long hard look at past efforts in the sixties and seventies. There was very clearly a serious, widespread problem with sustainability in a number of dimensions, environmental sustainability, but also financial, institutional, social and political, all kinds of dimensions to this issue of sustainability. People have worked very hard to say, "Well, how do we respond to that record of experience and how do we better amend our procedures and the design of our interventions to cope with this?" I think it is a two word phrase which is certainly heard probably a dozen times a day in DFID.
  (Dr Reynolds)  I would agree that continuous pressure is needed to ensure that the broad statements are actually implemented in practice. In relation to the Amsterdam Treaty commitment which Alan mentioned, the Luxembourg European Council in December last year asked the Commission to produce a strategy to implement integration within the Community. The Commission, last month in May, published a communication setting out guidelines for integrating environment into other policies. The key point there is that all new policies should be subject to environmental assessment and also the various sectoral councils, energy and so on, should produce strategies for integrating the environment into their work. The presidency has put this issue on the agenda for the coming Cardiff European Council so there will be a response from the Council. I cannot say at the moment what that will be. It is still under discussion, but the process is being taken forward with some momentum.

Lord Middleton

  162.  That leads me to my next question. In your booklet, A New Strategy, on page 15 at the top, you say, "Increased attention to the environment ..... will mean increasing the share of our resources devoted to it." My first question is: is this actually happening and, secondly, to what extent would this increased share, if it is an increased share, be channelled through the EU?
  (Mr Coverdale)  It is happening. I suppose most conspicuously, it happens in our own bilateral Knowhow Fund. Already, increased resources are flowing into specifically environmental projects. In the past, we limited our involvement in environmental projects I think entirely to the money available from the Environment Knowhow Fund. We are now supplementing the resources available from the Environment Knowhow Fund, which is the money we receive from DETR, with the resources from the Knowhow Fund programmes which DFID commands. We are preparing country strategies at the moment for the scrutiny of our ministers to explain the priorities within countries, which is an exercise really in mapping the strategy in that booklet onto the individual countries. We are furthest forward with our Russia strategy paper and that will recommend increased attention to environment projects. Indeed, we had a very helpful strategy mission two or three months ago, which was a joint mission between DFID and DETR, which was very helpful in helping us to identify our priorities in Russia in this area. We have also negotiated within DFID increased staff resources for this area of work, increased time from our environment adviser. I think the increased resources which DFID would like to make available for environment projects would be channelled bilaterally. We would look to influence the European Commission to allocate an appropriate share of its own resources to environment projects and the mechanism for doing that is through the negotiation of the new TACIS regulation. That process will take place next year.

  163.  When you talk about increasing the share for the environmental objective, one is bound to ask whether the other objectives which you set out on page six of your booklet—economic growth, inclusive approach to economic management, access to right skills, security of information, deepening integration into the international community—will get proportionately fewer resources?
  (Mr Coverdale)  Yes, it must. The flavour of our approach has been that there is a great deal worthwhile in what the Knowhow Fund has done traditionally and we do not want to sweep that away in terms of the experience, the knowledge and the influence we have in those important areas. We are keen to increase our involvement in the social aspects of the transition and in the environmental aspects of the transition. Yes, the shares will alter but on a country by country basis, recognising that some countries are further on in the transition and have different needs to others which are further back.

Lord Ponsonby of Shulbrede

  164.  I wanted to ask another supplementary to this point. There is another question later on where we ask whether the funding is demand led and what I really wanted to ask was whether the recipient countries share this will to concentrate greater resources on environmental measures. Certainly in my experience of the former Soviet Union, there was some scepticism about that and they really wanted to devote the resources available to generating economic growth. To be honest, I have heard expressed to me once or twice some resentment that they were being forced down routes that would not necessarily be their first choice.
  (Mr Coverdale)  Under the bilateral Knowhow Fund, we are not so constrained by that because it is not an official, government to government programme which is agreed centrally with the Russian government. We have informal exchanges with them and we share our objectives. They are comfortable with the strategy we are outlining for Russia at present. For TACIS, I think the importance of the regulation is to clear the minds of the European Union as to what they want to do with this vehicle, with this instrument. That becomes a basis for the discussion with the individual countries about what are the appropriate indicative programmes. It is important that the Union clears its mind on its own priorities and what it wants to do with this instrument before it enters into discussions to agree those indicative programmes which essentially will be a matter of finding common ground between what the Union wants to do with TACIS and what the partner country would like to do with this assistance.

  165.  You have not really answered my question. I am sure the partner countries will want to get as many resources in whatever form they can but my question was whether there is a demand from the partner countries that there is an increased emphasis on environmental matters.
  (Dr Reynolds)  I would agree that there is a real issue here. Although the position varies from country to country within the NIS and also from municipality to municipality within the NIS, there is an issue of convincing decision makers there that there is not a sharp conflict between environmental improvement and economic growth. In many cases, these two go hand in hand because you are talking about, for example, reducing energy costs, reducing energy usage, which has economic benefits and environmental benefits. You are talking about economic growth in a way that is going to be sustainable and is not simply going to lead to problems in five or ten years' time, which will be very expensive to solve. The two go hand in hand. A lot of the activity that we are conducting under the Environment for Europe process is really directed at persuading and encouraging the governments there to understand this message, and also to improve public awareness so that there is increasing public pressure on those governments to raise environmental standards. In a sense, I would agree with you but this issue is being addressed as much as we can already.

Lord Walpole

  166.  I know this is not strictly TACIS; it is more PHARE, but if you read Agenda 2000 the one thing in common with everyone from central Europe who wants to come into the Common Market is in fact environmental problems, is it not? I certainly get the impression that it has got through to them from various people we have met from Hungary, Poland and the Czech Republic. They are aware of the fact that one of the bars to them joining the Common Market is their environmental problem. Do you feel it has got through to the central European countries more than it has got through to, say, the TACIS countries?
  (Dr Reynolds)  Again, I think I would agree that the factor of EU enlargement is a tremendous pressure on the accession countries to improve their environmental performance, because they are required to approximate their laws to the EU environmental directives, so there is that huge pressure on them. That is already producing results. They are taking it very, very seriously. In the NIS countries, that pressure is not there, although it is the case that in a number of NIS countries there is a great deal of interest in adapting their standards to EU standards. For example, in the Ukraine, they are looking already to EU standards, so there is a certain pressure there also, but clearly not as great.

Lord Middleton

  167.  The worry that Lord Ponsonby has expressed about priorities is backed up by what you say in paragraph 10.2 in your memorandum. The perception in the NIS is that social needs of large groups of people are not being met and people have more on their minds than the environment. Would you agree?
  (Mr Coverdale)  Yes, that is certainly right.


  168.  Could I suggest there that, if one talked about health rather than environment, it might actually be more convincing for them? If one is talking about air pollution or water pollution, one is actually talking about the population's health. The word "environment" in a way sounds as though it is about small, furry animals whereas, if one actually casts it in terms of the health of the population, are not people more convinced? I do not know what the Russian for "environment" is but it may be that the concept is rather diffuse and woolly whereas, if one is actually talking about people and how it is affecting the health of their children and so on, it might be more convincing.
  (Mr Coverdale)  Yes, we are comfortable with that.

Lord Elis-Thomas

  169.  One of our interests here obviously is the effective use of public funds, whether they be from EU sources or from UK government sources, from various departments. We have an interest in coordination between the UK fund, the Environment Knowhow Fund, bilateral assistance from other Member States and TACIS. Would you like to lead us into that perhaps with some examples of recent activities which would indicate that there is indeed a coherent relationship between the various funding programmes?
  (Dr Reynolds)  Alan has already explained a little bit about the role of the Environment Knowhow Fund and also the Knowhow Fund, because we are increasingly melding them together. I would just add I think a little bit to say that, in our bilateral activity, we concentrate particularly on areas like policy reform, building up institution capacity, drawing on the UK skills base in order to do that. We are not providing investment capital finance, but we do work with the international financial institutions particularly where they are considering loans and we can make a contribution in terms of project preparation or training or building up the capacity of the borrowers. Just to give a very brief illustration of the sort of projects we are doing, we are supporting a large project in St Petersburg, working with the water company there, the Vodokanal. We have already provided support for a water development plan which the EBRD is coordinating together with I think about six other Member States. It is a very big, multidonor project, but we have played a key role in helping to manage this project. That stage is completed and we are now moving on to a second stage, working again with the EBRD on a corporate development programme. This is all about building up the local Vodokanal so that they can use the lending which the EBRD will provide. That is one big project that we are doing.

Lord Mackie of Benshie

  170.  How long has that taken to get off the ground?
  (Dr Reynolds)  The first part is completed and it has led to a loan from the EBRD.


  171.  We are visiting it next week.
  (Dr Reynolds)  The second part is over a period of about three years and that will be starting shortly. At the opposite end of the scale, we have also recently assisted the Moldovan Ministry of Environment by helping with training on project preparation. This was an instance where we actually worked with the local TACIS office. They got in touch with us and asked us for some help. We provided some materials that we had produced and translated them and this cost virtually nothing, but it trained 20 people in project preparation. I will move on to the second part of your question which is about the relationship with TACIS. I think the main point to emphasise is that we work within the framework of Environment for Europe, which involves the EU Member States, the countries of central Europe and the NIS, the international financing institutions and the European Commission programmes. There are two particular bodies active under that process. One is the Project Preparation Committee and the other is known as the Environmental Action Programme Task Force. The Project Preparation Committee deals particularly with investment. It is an informal network amongst the bilateral donor countries, the banks and the EU to coordinate our activity in an informal way and to matchmake between different funding sources. That is investment primarily, but we are involved in that by providing technical assistance in support of investment. The other body, the task force, is more concerned with institutional development, policy reform. Again, it is a fairly informal network which is designed both to ensure good communication between the different donors but also to share experience. I think, on the environmental side, there is actually quite a good network in place to ensure good coordination.

Lord Elis-Thomas

  172.  To what extent is there a genuine sharing of experience here involving the recipient countries and the partnership countries as well as the European Union countries?
  (Dr Reynolds)  I think the key body here is the task force which involves all the countries of the region. It involves the NIS countries. They are quite active participants, in fact, and increasingly active. The secretariat for the task force is provided by the OECD and I think one of their strengths is that they are very good at analysing common problems and coming forward with good practices and spreading this information. I think that is actually working very effectively at the moment. Certainly amongst the environmental community, and to some extent the aid community who are also involved, those networks do exist.


  173.  The problem is that they are informal networks, are there not? Is there a case for having some sort of common database of projects that are going on in eastern Europe and the old Soviet Union? I mean just one which can log what they are doing. With modern computers, I would have thought it would be quite easy to have some sort of record.
  (Dr Reynolds)  My view would be that the informal network works better. A lot of attempts have been made to set up databases. It is an additional burden to provide the data when it is needed and often databases tend to be a historical record of projects rather than what is really happening at the moment.

  174.  It is a problem about all the countries having bilateral aid systems. I do not know whether all the countries in Europe do but if they all have something like the Knowhow Fund the whole informal network is likely to break down, it seems to me.
  (Dr Reynolds)  The advantage of an informal network is you know who the people are and you can phone them up and say, "We are thinking of doing a project in such and such a country. Are you already active there?" We know Helen Holm very well, for example, and we can contact her directly on an informal basis.

  175.  A network works as long as it is not too big.
  (Dr Reynolds)  Yes.

Lord Hughes of Woodside

  176.  Have you seen the evidence we have received from the EBRD, the local authorities and Commission DGIA?
  (Mr Coverdale)  Yes.

  177.  There are two ends of the spectrum, if you like. The EBRD expressed some concern, as I recall, about follow-up finance and how that would be coordinated. The local authorities were very enthusiastic. Have you any comments to make on the evidence we have from these bodies? The DGIA one was a bit technical for me. I do not know about anyone else.
  (Mr Coverdale)  We read the evidence with interest. The evidence given especially by EBRD echoed much of our own thinking, for example, on lengthy TACIS procedures and the like. We did not have any other specific comments on the evidence you have received.

  178.  Leading on from that, as we have been reminded, the 1996 TACIS regulations were the first which identified the environment as a priority. What mechanisms actually exist to ensure that environmental activities get a fair share of the TACIS budget? In other words, how are the TACIS priorities determined? You have said that in the presidency you have tried to push the environment forward in all these programmes but how also does one strike a balance between nuclear safety and other environmental needs, especially since, if you look at the deterioration in the environment in the TACIS countries, it seems to be deteriorating faster rather than improving at all.
  (Mr Coverdale)  As I said earlier, the TACIS regulation is really the first step which hopefully clears the minds of the European Union as to what it wants to do. Then that is the background to discussion of indicative programmes with the countries involved, the demand led approach that we will no doubt come on to. Those indicative programmes then come back to the management committee for scrutiny and approval, upon which we sit, and then the indicative programmes themselves are translated into annual action programmes for Russia and the Ukraine and biannual for the other NIS countries, I think. Those action programmes too come back to the management committee. It is done on a country by country basis in the light of those discussions and I suppose we have to take a view as to whether the spirit of the regulation and what has been agreed in the regulation is being honoured in the indicative programmes and in the country programmes which come out. There is not, I think, a clear mechanism in particular for striking a balance between nuclear safety and other environmental needs. Specific decisions were taken on allocations for nuclear safety at a political level in response to specific nuclear-related needs. In particular, one thinks of Chernobyl. That has taken quite a significant share of the TACIS programme, or indeed a large share of the money which is being spent on the environment.

  179.  What you have described is a mechanism for the TACIS programme, but if I am right—and if I am wrong I am sure you will tell me—there is not actually a mechanism to ensure that environmental activities get a fair share of the TACIS budget. It really depends on the alertness or the awareness of the different people of different countries who deal with it at different stages.
  (Mr Coverdale)  I think we have taken the view, in negotiating the regulations, that, while we are only one voice amongst many, to too clearly specify percentage shares or stipulate percentage shares will put the Commission in something of a straitjacket in its negotiations. There has to be a demand led aspect to this process. There has to be local ownership of the programmes and they have to respond to that country's needs.
  (Mr Lowcock)  It is indeed the case that there is no specific allocation, either in terms of a fixed sum of money or a proportion of the TACIS overall resources which are allocated for any one sector, whether it be environment or another sector. That is an approach which reflects the practice not just in TACIS but in, I would say, many development agencies, bilateral and multilateral. The point about flexibility, about not being constrained by saying from the outset that X per cent will go to sector A, Y per cent to sector B and Z per cent to sector C, is one which arises from the experience that development agencies over the last three or four decades have had in discussion with partner governments, recipient governments, about how flexibly to respond to needs as they evolve.

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