Select Committee on European Union Thirty-Seventh Report

11th REPORT: THE EUROPEAN UNION'S ROLE AT THE MILLENNIUM REVIEW SUMMIT

Letter from Rt Hon Douglas Alexander MP, Minister for Europe, Foreign and Commonwealth Office to the Chairman of Sub-Committee C

  I refer to your letter of 27 July 2005 to Tim Morris enclosing the Committee's report on the EU's role at the Millennium Review Summit. I enclose the Government's response to the report, which addresses specifically the Committee's conclusions as outlined in Chapter 8 of the report.

  The Committee might also be interested in the attached documents. These illustrate the very close and effective cooperation that EU Partners maintained in the run-up to the Summit, which resulted in broad agreement between Partners on the EU's priorities for the Summit. I enclose:

—  extracts from the June European Council and July GAERC meeting conclusions;

—  the EU priorities paper for the 60th session of UNGA;

—  the EU written statement at the Summit itself; and

—  the EU written statement circulated to delegations in New York to accompany the Foreign Secretary's statement on behalf of the EU at the general debate of the 60th session of the UN General Assembly that immediately followed the Summit.

  I also enclose a copy of the paper on conditionality written jointly by the Treasury and the Department of International Development.

  I understand that the Committee's report will be debated in the House of Lords on Thursday 20 September. Lord Triesman will participate, and wind up for the Government.

28 September 2005

Government Response

CHAPTER 8: CONCLUSIONS

114.  In order to ensure a successful outcome at the Millennium Review Summit the EU must articulate the case for reform, use its transatlantic relationship to influence the United States and have a serious dialogue on the reform agenda with countries in Africa, Asia and Latin America (para 32)

  The European Union worked tirelessly to promote a successful Summit outcome.

  In New York and in capitals the EU encouraged all UN Member States throughout the negotiating process to play their part in ensuring a successful Summit outcome. Shortly before the Summit itself, when negotiations were at a very difficult stage, the EU—Presidency and several Member States—lobbied at the highest levels including in Africa, Asia and Latin America, emphasising the need for constructive participation in the end-game negotiations. We were part of the core group in New York that sought to reach agreement on the most contentious parts of the Summit outcome text. The EU also urged partners, including the US, to show the necessary flexibility to reach compromise to achieve the best outcome possible. The Foreign Secretary and Secretary of State for International Development reinforced these messages with the US and key partners from all regional groupings.

  This overall effort was crucial in achieving the Summit outcome, which was finely balanced shortly before leaders arrived at the Summit. As the Prime Minister noted in his address to Summit leaders, if fully implemented, the reforms agreed will represent a major step forward for the UN system.

115.  The Government, whilst holding the EU Presidency, should give an adequate emphasis to the importance of the EU's role at the Summit and provide Parliament with an explanation of any areas of disagreement between United Kingdom and EU policies and priorities (para 34)

  We sought at every opportunity to stress the crucial role the EU would play at the Summit. As agreed with EU Partners, we raised as Presidency the importance of a successful Summit outcome in many of the EU's meetings with Third countries in the months preceding the Summit. Furthermore, Heads of Government at the June European Council, and Foreign Ministers at July's GAERC meetings endorsed the EU's strong support for the UN Summit process in their respective conclusions (attached at Annexes A and B). Partners agreed a priorities paper for the 60th session of UNGA (attached at Annex C). The EU also circulated a detailed written statement at the Summit, and a written statement to accompany the Foreign Secretary's statement on behalf of the EU at the general debate of the 60th session of the UN General Assembly that shortly followed the Summit (attached at Annexes D and E).

  There was a very broad consensus on the EU's position and priorities for the Summit. This reflected the very close cooperation that EU Partners maintained throughout the Summit process, in New York, Brussels and in Capitals.

  One area where there is no EU consensus is on Security Council reform. However this did not affect the EU's approach to the Summit.

116.  We commend the EU for its stated commitment to increased aid. The Minister for Europe is right to acknowledge the very significant commitment made by the EU-10, until recently recipients of aid themselves.[3] But we note that some doubts have been expressed as to whether all the Member States so committed will be able to deliver the sums pledged. We therefore recommend that monitoring procedures be rigorously applied in order to ensure that the pledges made by all Member States are met (para 41)

  We agree that progress should be rigorously monitored and believe that it will be. Each Autumn the European Commission will send a questionnaire to Member States asking them to report progress on a series of development commitments, including the new aid volume commitments. On the basis of this information the Commission will issue a report each Spring which will then be discussed by the Council of Ministers. The progress made by each individual Member State will be visible for all to see.

117.  We recommend that, well in advance of the December Council, the Government provides to Parliament for examination a detailed analysis of how the EU's new long-term strategy on Africa will implement the outcome of Gleneagles and of the Millennium Summit Review (para 43)

  We agree with the recommendation. An explanatory memorandum on the European Commission's Communication on the EU Strategy for Africa will be submitted for parliamentary scrutiny. A debate on EU development, including Africa, has already been organised by the House of Commons EU Scrutiny Committee for 3 November.

118.  If broad participation in the International Finance Facility is to be secured the Government will, as a matter of priority, need to convince European and other partners of the usefulness of this instrument and encourage them to support it (para 45)

  We agree. On 9 September, the UK launched the pilot IFF for Immunisation (IFFIm) alongside the announcement of pledges to the IFFIm by France, Italy, Spain and Sweden. The IFFIm demonstrates the technical feasibility of the IFF and the frontloading principles. On the same day as the IFFIm launch, the UK and France jointly announced that they would implement the IFF.

  We continue to discuss the IFF with EU and non-EU donors, with the aim of launching the IFF in 2006. The IFF already has support from over 80 countries, including France, Italy, Sweden, Brazil, China and South Africa. However, one of the advantages of the IFF is that it does not require the agreement—or participation—of all donor countries for it to be launched.

119.  The EU should make serious efforts to enlist the support of the emerging countries of the globalised economy in its efforts to gain support for its development agenda (para 48)

  EC delegations engage in regular dialogue with emerging countries on the development agenda. In addition, outreach to the emerging countries of Brazil, China, India, Mexico and South Africa was a major part of the G-8 agenda this year, with the Summit in Gleneagles attended by EC President Barosso.

  Since then, there have been the EU-China and EU-India summits, which have included development issues on the agenda.

  Trade is also an important part of the development agenda. The EU will continue to work closely with all WTO members, including the G20 grouping of developing countries (which includes China, India and Brazil) to move the WTO Round of trade negotiations forward, to ensure a successful outcome to the WTO Ministerial Conference in Hong Kong in December. We aim to complete the WTO Round in 2006.

120.  We were interested to hear the Minister for Europe mention a paper written jointly by the Treasury and the Department of International Development on conditionality and recommend that the Government make this paper available to Parliament with an explanation of how far the Government's analysis is shared by other EU Member States and the European Commission (para 49)

  The paper on conditionality, a copy of which is attached, will be placed in the Commons and Lords libraries, and we are currently analysing to what extent our policy is shared by other EU member states and the EC. Once this analysis is complete it will also be placed in the Parliamentary libraries.

121.  We call on the Government, in cooperation with Italy, France and Germany, to work on securing the agreement of other leading nations to the G8 initiative (para 51)

  We are working closely with all other members of the G7 to secure the agreement by the Boards of the IMF, World Bank and African Development Bank to press ahead with implementation of the G8 debt relief initiative. We will provide the Committee with a readout from the Annual Meetings of the World Bank and IMF, where the issue is scheduled to be discussed.

122.  We urge the Government to give a strong lead in the EU preparations for the WTO ministerial meeting in Hong Kong in December 2005 and to take forward the discussion on reforming the Common Agricultural Policy in a way that benefits developing countries[4] (para 52)

  As EU Presidency, we will work closely with the Commission, our EU partners and other WTO Members to build on the progress made so far to ensure a successful and pro-development outcome at the WTO Ministerial Conference in Hong Kong in December. This will allow us to achieve our aim of completing the WTO Round by the end of 2006. A successful trade round has the potential to lift 140 million people off subsistence of less than $2 a day 60 million people in sub-Saharan Africa alone. Agriculture is the key issue for developing countries.

  We will continue to press for reform of the CAP and other developed countries' trade-distorting agriculture policies. Within the WTO Round, we will push for improved market access for developing countries, reductions in trade-distorting domestic support and agreement on an end date for agricultural export subsidies at Hong Kong. We believe that WTO members can and must agree an end date of 2010. In the longer term, we will continue to press for further reform of the CAP.

123.  We agree with the Minister for Europe that it has been a "brave and principled" decision by the Government to pick climate change as one of its key priorities for the United Kingdom's EU ands G8 presidencies.[5] We urge the Government to seek agreement at the international conference in November, and to promote a specific date for the start of the post 2012 discussions included in the Millennium Review Summit draft-outcome document. The date should ideally be the December 2005 UN Climate Change Conference, where the United Kingdom will represent the EU (para 57)

  The 1 November meeting marks the formal launch of the Dialogue on Climate Change, Clean Energy and Sustainable Development which was agreed at Gleneagles to provide a forum for continuing discussions amongst the G8 and China, India, Brazil, South Africa and Mexico and other countries with significant energy needs.

  The Dialogue will create a unique forum for participating countries to work together on the shared challenges of addressing climate change, energy security and access to energy. The Gleneagles Communique outlined the need to:

(a)  address the strategic challenge of transforming our energy systems to create a secure and sustainable future;

(b)  monitor the implementation of the Gleneagles Plan of Action and explore how we can build on that progress; and

(c)  share best practice.

  The Gleneagles Communique makes very clear that the Dialogue is not a substitute for negotiations on future action in the UNFCCC. The UNFCCC is the only place where agreement can be reached on future action.

  The UN Climate Change Conference (COP11 COP/MOP1) in Montreal later this year will represent the first time that an item that allows the Parties to discuss formally commitments post-2012 has been included on the Agenda. This item will cover Article 3, paragraph 9 of the Kyoto Protocol, which covers consideration of commitments for subsequent periods for Parties included in Annex I to the Convention. The EU's objective for this agenda item will be to secure the start of negotiations on further international action post 2012.

  The EU is also looking forward to initiating a process among all Parties to explore how to implement better the UN Framework Convention on Climate Change.

124.  The EU should, if necessary, continue to press for new principles on the application of force beyond the Millennium Review Summit (para 66)

  The EU welcomed the reaffirmation at the Summit of the provisions in the UN Charter on the use of force and the unprecedented recognition of the responsibility to protect. EU member states are likely to continue to promote debate on the circumstances in which it is right to use force, so that action can be taken against the full range of serious threats to international peace and security, including those from terrorism or proliferation of WMD.

125.  We endorse the concept of the responsibility to protect; we hope the EU will throw its full weight behind its endorsement at the Review Summit; and we express our hope that the Security Council will apply it in future when cases are brought before it which justify such action (para 69)

  The endorsement of the responsibility to protect was an important achievement of the Summit. For the first time, the international community has agreed that it cannot stand by as genocide, war crimes or crimes against humanity are committed against vulnerable populations. At the Summit, the world's leaders recognised that their governments and the international community have a responsibility to act, with force if necessary, even when atrocities are committed within another member state's borders.

126.  We recommend that the Government press for as much specific language as possible in the Millennium Review Conclusions so that the "actual setting up of the Peacebuilding Commission does not in some way go backwards or be delayed".[6] Its objective should be to have the Commission up and running by the end of 2005. We agree with the EU position that the Peacebuilding Commission needs to be closely linked with the Security Council (para 73)

  The Committee's recommendations on the Peacebuilding Commission are entirely in line with the Government's view and were taken up in our negotiating position in New York.

  As a result, we achieved a detailed outcome text setting out both the functions, organisation and membership of the Commission (and related Peacebuilding Support Office and Fund) and agreement that its reports should be made widely available. The Summit text also establishes a deadline of 31 December 2005 for the Commission to begin operations.

  What remains now is to agree on which UN organ(s) should be involved in the Commission's establishment this was the single most controversial issue in the negotiations on the Peacebuilding Commission prior to the Summit. The Government will continue to press for the closest possible link to the Security Council, particularly as regards the Commission's day-to-day operations.

127.  We urge the Government to do its best to ensure that the strategy against terrorism is finally endorsed at the Millennium Review Summit (para 76)

  We did just that and achieved a good outcome. Some Member States had doubts about specific items within the Sercretary-General's strategy so we were unable to secure full endorsement. But the Summit welcomed the outline presented by the Secretary-General and, crucially, agreed a process to take it forward.

128.  We urge the European Union to take an active role in talks with the Organisation of the Islamic Conference to reach agreement on a Comprehensive Convention on Terrorism as soon as possible (para 78)

  The EU continues to do this. The Summit strongly condemned terrorism, though it did not go on to describe terrorists acts. We continue to press OIC members at every opportunity to fight for the definition of terrorist acts contained in the "Co-ordinator's text" of the Comprehensive Convention. The Summit agreed to try to agree the Convention within a year. We will do all we can to make it happen.

129.  The NPT Review Conference was a disastrous failure and more needs to be done. The Government should include non-proliferation among its priority objectives for the Summit (para 81)

  Like many other countries, the UK was disappointed that no substantive outcome was achieved at the NPT Review Conference, particularly after the strong urging given to the Conference by the UN Secretary General in his opening address. The Foreign Secretary was therefore pleased to accept the Norwegian Foreign Minister's invitation to join an initiative that sought to redress the lack of substantive results at the Review Conference with a robust declaration on these issues at the Millennium Review Summit. In this initiative, as in our work for the NPT Review Conference, the UK hoped to spur the international community to strengthen the nuclear non-proliferation regime.

  We worked until the last minute, both nationally and as EU Presidency, to seek the best possible outcome on non-proliferation and disarmament at the Summit. We share the UN Secretary General's disappointment at the lack of international commitment shown by the inability of States to agree any language on these subjects. Non-proliferation remains a Government priority, and we are currently considering how best to find pragmatic solutions to overcome this setback and enhance the nuclear non-proliferation regime.

130.  We support the proposal to establish a Human Rights Council which would, we believe, be more effective and more respected than the current, largely discredited, institution. We urge the Government and the EU to support all measures proposed at the Millennium Review Summit to strengthen the UN human rights machinery (para 88)

  We welcome the Summit's resolve to create a Human Rights Council responsible for promoting universal protection of all human rights and fundamental freedoms, to address violations of human rights and make recommendations. The EU was disappointed that it was not possible to agree more detail about the Council at the Summit. However, the EU looks forward to working with the President of the General Assembly and partners to take forward work on this as soon and as effectively as possible.

  We support the Secretary General's call to resume negotiations on the Council on the basis of the detailed language developed in the run up to the Summit, including, for example, that it must be a standing body able to address urgent human rights situations and questions; must preserve and build upon the strengths of the Commission on Human Rights, in particular the system of special procedures and participation of civil society; and that its members must undertake to abide by the highest human rights standards.

131.  We believe that the EU Member States should be ready to contribute to a democracy fund if the modalities of its operation can be satisfactorily negotiated (para 91)

  At the Summit the EU welcomed the establishment of the UN Democracy Fund. We support its remit to co-ordinate and complement democracy-strengthening activities throughout the UN system. As at 16 September the UK, France, Germany, Hungary, Italy and Portugal have made initial financial pledges to the Fund. Other member states may do so in due course.

132.  The Government must do all it can to ensure that the issue of Security Council reform does not overwhelm all the other important aspects of this Summit (para 102)

  The High Level Panel report and In Larger Freedom made Security Council reform more likely now than for several years. However, there was no agreement among the 191 UN member states on a model of reform before the Summit and it did not overshadow the broader summit agenda. The UK continues to support an enlarged Council to make it more representative. We expect the debate to continue.

133.  We call for the Government to state how it believes the UN General Assembly can be revitalised and to work towards the reforms proposed by the Secretary General (para 106)

  The General Assembly has set up a working group, open to all Member States, to identify ways to further enhance the effectiveness and efficiency of the GA. The UK, as a leading proponent of UN reform, will continue to ensure that the working group leads to practical steps that build on previous resolutions and the proposals in the Outcome Document. Revitalisation should include streamlining the Assembly's agenda, reducing duplication with other UN bodies, and other measures to promote more efficient working methods.

134.  We agree that reform of the UN Secretariat to make it more effective and accountable is both necessary and urgent. The Government should press for the acceptance by all UN member states of the Secretary General's reform package (para 109)

  We welcome the significant progress that the final Outcome document represents. There is strong language and a significant level of detail on strengthening oversight at the UN, in recognition of the need for improved transparency, accountability and efficiency. The future reviews of programme mandates, human resources, budget and programme planning rules are all significant steps forward. It is vital that the UN's resources are channelled to the areas of greatest need and impact, and in this respect we welcome the Summit decision on the review of mandates.

  A key task for us during the current General Assembly will be to ensure we deliver these reforms without losing to the lowest common denominator that consensus sometimes delivers. We will be working closely with partners and with the Secretariat to develop strategies to deliver this reform as work on implementing summit outcomes continues.

135.  The Government should make available to Parliament, following the Millennium Review Summit, its analysis of how successful any agreed reforms of ECOSOC are likely to be, and what other reforms might be required in order to render ECOSOC an effective multilateral institution (para 113)

  The EU has welcomed the Outcome document's provisions on ECOSOC, reinforcing the role of ECOSOC as the principal body of UN for co-ordination, policy review and policy dialogue on issues related to development and, in particular, on the implementation of the Millennium Development Goals.

  The Outcome document also acknowledges that in order to do this ECOSOC will have to change the way it organises its work. The UK would like to see this include streamlining of the current agenda, and a reduction in overlap between ECOSOC and other UN bodies such as the Functional Commissions and the General Assembly.

Annex A

JUNE EUROPEAN COUNCIL CONCLUSIONS: EXTRACT ON UN SUMMIT

V.  EXTERNAL RELATIONS

Preparation for the September 2005 United Nations Summit

  23. The European Council considers that the United Nations Summit will provide an opportunity to reaffirm our support for the UN as an international relations instrument founded in law. It reaffirms its strong support for effective multilateralism and for the process of reform of the United Nations. It emphasises that the report which the Secretary-General presented on 21 March 2005 is balanced and, with the contribution from the President of the General Assembly, provides an excellent working basis for the declaration to be adopted in September in New York.

  24. The European Council wishes to express its gratitude to the Secretary-General for the exhaustive and coherent nature of his report. It shares the Secretary-General's views on his integrated concept of collective security and supports the idea that development, security and human rights are interdependent and mutually reinforcing. It welcomes the strategies proposed in the areas of development, security, human rights, the rule of law and democracy.

  25. The European Council considers it essential to achieve a balanced and ambitious outcome enabling the UN to be reformed so that it can respond more practically and effectively to the multi-dimensional threats and challenges identified in the Secretary-General's report.

  26. Against that background, the European Council emphasises its commitment to pursuing a substantial dialogue with all UN member countries with a view to preparing for the Summit.

  27. Development plays a crucial role in the preparation of the Summit. In this respect, recalling the prime responsibility of developing countries for their own development, the European Council welcomes the agreement reached by the Council concerning Official Development Assistance (ODA). In the context of the commitment to attain the internationally agreed ODA target of an ODA/GNI ratio of 0,7%, the European Council notes with satisfaction that its Member States are on track to achieve the 0,39% target of GNI in 2006 for ODA volumes contained in the Barcelona commitments. While reaffirming its determination to fulfil these commitments, the Council decided on a new collective European Union target of an ODA/GNI ratio of 0,56% by 2010. That would result in an additional EUR 20 billion a year in ODA.

  28. In this context, the European Council can reiterate that Member States which have not yet achieved an ODA/GNI ratio of 0,51% undertake to attain that level, within their respective budget allocation processes, by 2010, while those that are already above that level undertake to continue their efforts. Member States which joined the EU after 2002, and have not yet achieved an ODA/GNI ratio of 0,17%, will endeavour to increase their ODA to attain that level, within their respective budget allocation processes, by 2010, while those that are already above that level undertake to continue their efforts; Member States undertake to achieve the target of an ODA/GNI ratio of 0,7% by 2015, while those which have achieved that target commit themselves to remaining above that target Member States which joined the EU after 2002 will endeavour to increase their ODA/GNI ratio to 0,33% by 2015.

  29. The European Council invites the Council to pursue its consideration of the most promising options for innovative sources of funding for development, so as to increase the resources available in a sustainable and predictable manner.

  30. The European Union recalls the need, in parallel with funding-related efforts, to improve the quality and effectiveness of Official Development Assistance, and the need to reinforce capacities and ensure the viability of increased Official Development Assistance for partner countries. It welcomes the Paris Declaration on Aid Effectiveness and recalls the commitment by the Member States and the Commission to ensure that it is implemented and followed up without delay, that verifiable key targets are established, and that the specific commitments which the European Union adopted at the High-level Forum in Paris are implemented.

  31. The European Council confirms that the European Union will continue to take account of development cooperation objectives in all policies that it implements which are likely to affect developing countries. The EU will make a particular effort to promote and increase the consistency of development policies in the context of the Global Partnership for Development under Millennium Development Goal (MDG) No 8.

  32. The EU considers the development of Africa a priority and will step up its efforts to assist African countries to reach the Millennium Development Goals. In this context, the European Council reaffirms the European Union's intention of increasing its financial assistance for subsaharan Africa by collectively allocating at least 50% of the agreed increase in ODA resources to the African continent, respecting the priorities of the various Member States. Aid for countries which are emerging from conflict and for fragile States will also be improved.

  33. The European Council regards the creation of the Peace Building Commission, conflict prevention, the fight against terrorism, the adoption of principles governing the use of force, disarmament, the non-proliferation of weapons of mass destruction and their delivery systems and the strengthening of the United Nations' peacekeeping capabilities as its priorities in the area of security in the preparation of the Summit.

  34. The European Council welcomes the agreement reached at the United Nations General Assembly on 13 April 2005 on the Convention for the Suppression of Acts of Nuclear Terrorism and calls on all members of the United Nations to sign that Convention during the Summit in September.

  35. With regard more specifically to the non-proliferation of weapons of mass destruction, the European Council deplores the fact that despite the EU's efforts, the NPT Review Conference was not able to achieve a document by consensus, dealing with the basic questions. The European Council reiterates the importance which it attaches to the consolidation of the NPT and hopes that the issue will be addressed at the September Summit. It confirms its common position, adopted for the Review Conference, as the basis for pursuing its objectives in the forthcoming examination of the NPT.

  36.    The European Council welcomes the prominent place given to human rights, the rule of law and democracy in the reform proposals. In this connection, the European Council reaffirms the importance which it attributes to the concept of responsibility to protect, which must be implemented by the Security Council. It supports the Secretary-General's proposals to reinforce the role and resources of the High Commissioner and to establish a Human Rights Council meeting throughout the year, linked to the General Assembly, and reflecting the universality of human rights and their central position in the UN system. It also supports the call for the strengthening of the High Commissioner's Office, inter alia through its interaction with the Security Council. Those initiatives should increase the extent to which account is taken of human rights in the United Nations' activities.

  37.    In the area of institutional reforms, the European Council recognises the need to reform the main UN bodies, among them the General Assembly, ECOSOC and the Security Council, with a view to enhancing the representativeness, transparency and efficiency of the system. It also supports reform efforts in the areas of the budget and administrative management, to enable the UN better to fulfil its mandate.

  38.    Sustainable development, including environmental questions and concerns, must be integrated to a greater extent in national and international development programmes and strategies. The European Council supports the Secretary-General's urgent appeal for a more integrated international environmental governance structure, based on existing institutions. In this perspective, and. given the environmental challenges associated with development, the EU proposes that the high-level meeting in September 2005 initiate a process, as part of UN reform, which will lead to negotiations on the establishment of a UN agency for the environment, based on UNEP, with a revised and strengthened mandate, supported by stable, adequate and predictable financial contributions and operating on an equal footing with other UN specialised agencies. This agency, based in Nairobi, would make it possible to develop the environmental dimension of sustainable development in an integrated and consistent manner, and would cooperate closely with multilateral agencies, each using its comparative advantages to best effect.

Annex B

DRAFT COUNCIL CONCLUSIONS ON UN SUMMIT

  The Council discussed preparations for the United Nations Summit to be held from 14 to 16 September 2005. The Council welcomed the Commission Communication "The 2005 UN Summit: Addressing the global challenges and making a success. of a reformed UN"—as an important contribution in shaping the European Union's aspirations for the Summit. The Council recalled the European Union's recent decision on increasing aid volumes and effectiveness, enhancing policy coherence for development, and focusing on Africa, and welcomed the commitments made at the G8 meeting in Gleneagles.

  Recalling the conclusions agreed by the European Council in June and its own decisions of 24 May, the General Affairs and External Relations Council agreed that the European Union should continue to attach the highest priority to ensuring a balanced and ambitious Summit outcome, resulting in substantive actions to support the full implementation of the Millennium Declaration and related commitments, as well as in a stronger and more effective UN that can better meet today's interconnected challenges to international development, peace and security, and human rights. The Council supports the efforts of the UN General Assembly President in drafting a declaration, based on the concepts and proposals contained in the Secretary-General's March Report "In larger freedom".

  In particular, the Council emphasises the importance of:

—  more and better aid, including debt relief and innovative sources of funding for development, to meet the ODA objectives and the Millennium Development Goals and other existing commitments from major international conferences and recalls the EU's recent commitments to increase levels of ODA;

—  good governance, the social dimension of globalisation, and the special needs of Africa;

—  international trade as an engine for development, the call for rapid completion of the Doha Development Round, and the call for market access for LDCs;

—  its conclusions of 24 May, which inter alia highlight the importance of an intensified multisectoral response to HIV/AIDS as laid down in the European Programme for Action to confront HIV/AIDS. The EU further recognises that the MDGs cannot be attained without progress in achieving the Cairo goal of universal sexual and reproductive health and rights;

—  the need to make progress on environmental sustainability issues such as climate change and biodiversity, and a more coherent institutional framework of international environmental governance built on existing institutions including through launching a process leading to the creation of United Nations Environment Organisation;

—  the creation of the Peacebuilding Commission;

—  strong language on terrorism (leading to a definition of terrorism and conclusion of the Comprehensive Convention), disarmament, non-proliferation, and strengthening the rule of law;

—  the responsibility to protect;

—  strengthening the UN's human rights machinery including the establishment of a Human Rights Council in order to truly elevate the Commission on Human Rights and reinforcing the role and resources of the Office of the High Commissioner for Human Rights;

—  strengthening gender equality in all UN activities;

—  strengthening the new UN capacity building for rapid action in the face of humanitarian disasters;

—  modernising and reforming the UN administrative system, including the Secretary General's longer term vision for grouping the various agencies, funds and programmes into more tightly managed entities in the field of development, humanitarian assistance and environment, and further improving UN system coherence at country level.

  The Council recognises the need to reform the main UN bodies, among them the General Assembly, ECOSOC and the Security Council.

  The Council welcomed the work of the Latvian President and Irish Foreign Minister as two of the UN Secretary General's Special Envoys for preparation of the Summit and agreed that the Presidency should conduct intensive consultations in New York and capitals ahead of the Summit and carry out further outreach in third country capitals as necessary. The Council agreed that Presidency should prepare a written statement, drawing on the June 2005 European Council Conclusions, the Commission Communication, and EU statements and position papers, for circulation at the Summit.

Annex C

EUROPEAN UNION PRIORITIES FOR THE 60th SESSION OF THE UNITED NATIONS GENERAL ASSEMBLY

INTRODUCTION

  1.    The European Union is deeply committed to the United Nations, to upholding and developing international law, and to effective multilateralism as a central element of its external action. This commitment was strongly reaffirmed by the European Council in its conclusions of 16-17 June. During the course of the 60th General Assembly of the United Nations, the European Union will give the highest priority to engaging with its UN partners on implementation of the agreements reached at the September Millennium Review Summit. It will also engage with UN partners on other key issues such as co-operation in crisis management, refugees/displaced persons, negotiations of the next UN Budget and the Capital Master Plan.

2005 HIGH LEVEL EVENT

  2.    The 60th Session of the United Nations General Assembly has special significance this year in view of the meeting of Heads of State and Government on 14-16 September 2005 for the High-Level Plenary Event of the General Assembly in New York. Five years after the 2000 UN Millennium Summit, the 2005 Summit will assess the implementation of the Millennium Declaration, the Millennium Development Goals and the outcome of major UN summits and conferences in the economic, social and related fields. The Summit will also adapt the UN to new realities and define specific tasks in this respect.

  3.    The European Union stresses that the Secretary General's report "In Larger Freedom" is a good basis for the negotiation of an outcome document for the Summit in September and considers it crucial to agree on a package of development, human rights, security and UN institutional reforms. The result should be a strengthened and more effective United Nations, better able to address the interconnected and multidimensional threats and challenges to international peace, security and development. The EU will strengthen its efforts in a common endeavour to work for an ambitious and balanced outcome at the Summit and is committed to working constructively with UN partners during the 60th General Assembly and elsewhere to implement the agreements made at the Summit.

  4. The EU stresses the high importance of development issues in the 60th UNGA. The EU's recent commitment to new levels of ODA, notably to reach a collective 0.56% ODA/GNI by 2010 and 0.7% by 2015 which will result in an additional annual 20 billion euros ODA by 2010, underlines the priority the EU attaches to financing for development. The EU will strive for an ambitious and concrete programme of action, involving more and better financing for development, including through innovative mechanisms; commitments and action, at national level, by developing countries to create and reinforce the necessary governance structures and environment for economic growth; and adopting ambitious national development strategies and policies, as well as paying special attention to the particular needs of Africa. In this regard, the EU recalls its collective commitment to allocate at least 50% of the agreed increase in ODA resources to Africa. UNGA60 should signal clearly the need for longer term, more radical reform of the UN development architecture.

  5.  The EU underlines the importance of taking into account the social dimension of globalisation in various policies and in international co-operation. The EU will promote employment and decent work for all.

  6.  The EU regards the creation of the Peacebuilding Commission, conflict prevention, the fight against terrorism, the adoption of general principles concerning the use of force, disarmament, the non-proliferation of weapons of mass destruction and their means of delivery and the strengthening of the United Nations peacekeeping capabilities as its priorities in the preparation of the Summit as far as the issue of peace and security is concerned.

  7.  The EU welcomes and strongly supports the establishment of a Peacebuilding Commission, to assist countries in making the transition from the end of armed conflict to the resumption of sustainable development activities and to better co-ordinate all bilateral and multilateral actors. The EU will work for an effective Peacebuilding Commission, which can prevent conflicts re-occurring.

  8. Regarding the fight against terrorism, the EU welcomes the proposal for a clear statement that violence targeted against civilians and non-combatants is not justified under any circumstances. It urges all states to unite behind the clear political declaration on this proposed by the Secretary General. The EU also supports the UN comprehensive counter-terrorism strategy proposed by the Secretary General in Madrid, including the elaboration of a universal definition of terrorism. The EU calls for agreement at the 60th GA on the Co-ordinator's text of the Comprehensive Convention on International Terrorism, and for the signature and ratification of all 13 existing UN counter-terrorism conventions.

  9. The EU also welcomes the prominent place given to human rights, the rule of law and democracy in the reform proposals. In this connection, the EU reaffirms the importance of the responsibility to protect. It supports the Secretary-General's proposals to reinforce the role and resources of the High Commissioner for Human Rights and to establish a Human Rights Council, with a robust mandate, in order to truly elevate the Commission on Human Rights. The EU would favour establishing the Human Rights Council as a main free-standing charter body of the UN, linked to the GA, meeting throughout the year and reflecting, at the institutional level, the universality of human rights and their central position in the UN system, as well as the concern to place human rights on the same footing as issues of development, peace and security. Pending a decision the General Assembly might take on the establishment of such a body, the Human Rights Council should be established as a subsidiary body of the General Assembly, thus creating a link with a universal body. The EU supports the strengthening of gender equality in all UN activities.

  10. The EU supports the development of co-operation between the United Nations and the regional organisations as an effective way to maximise efficiency in addressing the numerous challenges confronting the international community.

  11. The EU recognises that management reform and modernisation of the UN Secretariat will be key to delivery of Summit outcomes and to enable the UN better to fulfil its mandate. In particular, the EU calls for greater accountability, transparency, professionalism and efficiency within the UN Secretariat and greater authority for the UN Secretary-General to allocate and redeploy resources within an overall budget and posts ceiling.

  12. The EU also supports further structural reform of the UN development, humanitarian and environment systems and policies to improve system-wide coherence and effectiveness and promote sustainable development, and looks forward to working with all parties on specific proposals to strengthen environmental governance from the 60th UNGA. In this regard, the EU supports the launching of a process to establish a UN agency for the environment, based on UNEP, with a revised and strengthened mandate, supported by stable, adequate and predictable financial contributions and operating on an equal footing with other UN specialised agencies.

  13. In the area of institutional reforms, the EU recognises the need to reform the main UN bodies, among them the General Assembly, ECOSOC and the Security Council, with a view to enhancing the representativeness, transparency and efficiency of the system.

  14. The EU supports continued reform and revitalisation of the GA as a key element of the wider UN reform agenda. We will therefore support further rationalisation in the work of the GA Committees following the Summit. We will engage fully on areas that represent clear priorities in the UN agenda, including those where Summit follow-up action is needed. But on lower priorities, or on issues where leaders have already reached substantive Summit decisions, we are determined that in the wake of the Summit, the GA should not simply return to business as usual.

  15. The EU supports a reform of the modus operandi of ECOSOC and its subsidiary bodies to ensure that ECOSOC carries out its mandate more effectively. ECOSOC must better be able to promote global dialogue and partnership in the economic, social, environmental, and humanitarian fields. It must equally better promote coherent and co-ordinated approaches of the UN-system and has to play an important role in post-conflict situations.

HUMANITARIAN ASSISTANCE

  16. The EU will support improvements in humanitarian response commitments to predictable funding, predictable capacity and standby arrangements, as well as safe and unimpeded access to vulnerable populations. The EU will stress the need to observe humanitarian principles and International Humanitarian Law.

UN REGULAR BUDGET FOR 2006-07

  17. The EU will seek to adopt a budget that will strengthen the UN in support of implementation of Millennium Declaration proposals and agreements reached at the 2005 Summit. The EU is committed to ensuring the availability of resources for the UN, while adhering to our long-standing principle of budgetary discipline to ensure effective management of resources.

CAPITAL MASTER PLAN

  18. Given the urgency and the necessity of the renovation of the UN HQ in New York, the EU attaches great importance to the agreement of a comprehensive and coherent Capital Master Plan. The EU considers that decisions on this issue should be taken urgently.

Annex D

Statement of the European Union accompanying the speech of The Rt Hon Jack Straw MP, Foreign Secretary of the United Kingdom of Great Britain and Northern Ireland to the General Debate of the 60th Session of the General Assembly

17 September 2005: United Nations, New York

In his speech, the Foreign Secretary will refer to progress made at the World Summit, but will address his comments particularly to the Summit's recognition of the responsibility to protect and need for further engagement between the Middle East and the rest of the world

  The Acceding Countries Bulgaria and Romania, the Candidate Countries Turkey and Croatia*, the Countries of the Stabilisation and Association Process and potential candidates Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, Serbia and Montenegro, as well as Ukraine and the Republic of Moldova align themselves with this statement.

*  Croatia continues to be part of the Stabilisation and Association Process.

INTRODUCTION

  1.  At the Summit, which ended yesterday, world leaders took up the challenge of making the UN more efficient, effective and relevant. The European Union (EU) believes that the Summit Outcome is a clear milestone along the road of reform. It is a clear mandate for change, addressing challenges that the world has long faced—and others that the world is facing for the first time.

  2.  The EU knows that a stronger and more effective United Nations is the only way to secure global stability and prosperity. Events in the five years since the Millennium Summit have strengthened this conviction. Without a shared effort to accelerate progress towards the Millennium Development Goals, rich and poor countries alike face a future of increased instability. Failure in UN-led efforts to tackle the threats of terrorism and proliferation would endanger the prosperity of the developing world as much as the developed. The United Nations should not be a forum for countries to push individual agendas, but one in which the international community can agree common action for the benefit of all the world's citizens.

  3.  The EU's support for the United Nations does not make us blind to its faults. It makes us more determined to build a United Nations that can act quickly and effectively. The EU's deep commitment to the ideals of the United Nations and to the vital work it carries out around the world can be seen as well as heard. EU member states pay about half of all voluntary donations to humanitarian and development activities as well as nearly 40% of the cost of the UN's regular budget and UN peacekeeping operations.

SUMMIT OUTCOME

  4.  The EU welcomes the Outcome as a whole, but is particularly pleased with progress in a number of areas: the Summit's headline on the need for more and better aid, and for development efforts to focus on meeting the Millennium Development Goals and promoting sustainable development; the condemnation of terrorism; the detailed mandate for the establishment of the Peacebuilding Commission; the doubling of resources for OHCHR and the decision to create the Human Rights Council; the unprecedented recognition of the responsibility to protect; and crucial first steps towards a reformed UN Secretariat.

  5.  Like the Secretary-General, the EU had hoped for greater progress in some areas: a more substantial terms of reference for the new Human Rights Council; agreement to give the Secretary-General more flexibility and authority as Chief Administrative Officer of his Secretariat, in return for greater accountability; and backing for further measures on non-proliferation and disarmament.

  6.  Nevertheless, the EU believes that where action has been agreed, it is vital that the international community now takes it. Where the urgent need to discuss and implement has been recognised, the international community must now heed it. Words and promises must be made reality.

DEVELOPMENT

  7.  The need for such action is most vividly illustrated by the agenda on development. The Summit provided the foundation for strengthening the global partnership between developed and developing countries set out at Monterrey. Earlier this year, the EU set a timetable to reach new levels of Official Development Assistance. By 2010, this assistance will account for 0.56% of the EU's collective Gross National Income—resulting in an annual additional 20 billion Euros. By 2015 this proportion will reach 0.7%. And EU member states recently agreed to support the G8 agreement to write off debt. In addition, the Summit recognised the value of developing innovative sources of financing.

  8.  Sub-Saharan Africa is not on target to reach many of the goals for over 100 years and on some goals—including hunger and sanitation—the situation is actually going backwards. At least 50% of the agreed increase in EU aid resources, therefore, will go to Africa; in plain terms this means a doubling of EU aid to Africa over the next five years.

  9.  More aid on its own will not be enough. The real engines for making poverty history will be developing countries themselves. The EU believes that, as important as increasing aid, is making sure that it is used better and more effectively, in order to drive up standards of governance and help the poorest people for whom it is intended. This means developing countries adopting ambitious national development strategies, creating and reinforcing good governance structures, fostering a positive environment for economic growth and helping the private sector flourish. We welcome the strong and comprehensive commitments made in this regard by the African countries through the African Union, and its NEPAD initiative, and reflected in the Summit Outcome.

  10.  Some would say that we did not make enough progress on trade at the Summit. The EU believes that, through the Doha Round, the international community must deliver real gains for poor countries by reducing market barriers, abolishing export subsidies and significantly reducing trade-distorting domestic support, so that these countries can trade their way to higher growth and more jobs.

  11.  The international community of today owes it to future generations to ensure that development, in rich and poor countries alike, is sustainable in economic, social and environmental terms. The EU welcomes the Summit's recognition of the need to meet the commitments and obligations undertaken in the UNFCCC, and remains fully convinced that the UNFCCC is the appropriate forum for negotiating future action on climate change. The EU is firmly committed to urgent global action to mitigate climate change—a serious, long-term challenge for every part of the world.

PEACE AND SECURITY

  12.  The EU is taking a leading role across the development agenda. But this agenda cannot be advanced in isolation. Individual countries can only develop in a secure global environment. Just as development is not a preoccupation only for the developing world, so security is not only in the interests of the developed world. We have seen time and time again how conflict and instability in developing countries have destroyed fragile social and economic progress. The threats of terrorism and proliferation endanger the stable global environment within which trade flourishes and economies grow. Security is of direct relevance to the whole international community.

  13.  Progress was made at the Summit. The agreement to establish a Peacebuilding Commission will make a major contribution to a more coherent and better co-ordinated international response to the needs of countries emerging from conflict. It will help prevent conflicts from restarting and encourage countries to make the transition from violent instability to peaceful, sustained development. The EU is committed to seeing the Commission established by the end of the year.

  14.  Increasingly, conflict and violence takes place beyond the boundaries of conventional war. In July, the EU again suffered the horror of a major terrorist atrocity. This time, the target was London. But no continent is safe from the threat of terror. International terrorism requires an international response; we pay the price for each others' vulnerabilities.

  15.  The United Nations has already done much to set international standards against terrorism and to encourage and help States to meet them. The EU welcomes the Summit Outcome's clear condemnation of terrorism and the undertaking to conclude a comprehensive convention on international terrorism during the 60th session of the General Assembly. But the EU believes we must go further and affirm that the targeting and deliberate killing of civilians and non-combatants cannot be justified or legitimised by any cause or grievance.

  16.  Despite the Summit's failure to reach agreement on measures for non-proliferation and disarmament, work to make progress on these issues must go on. In his speech to the NPT Review conference, the Secretary General gave stark warning of the catastrophic global impact of any such use. We should heed his words. At the conference the international community made clear its continued commitment to the non-proliferation regime and to disarmament.

HUMAN RIGHTS

  17.  The Secretary General has said that we will achieve neither development nor security without respect for human rights. Over fifty years the UN has had remarkable success. It has built a framework of international human rights law that sets clear standards by which all states are judged. As has long been recognised, however, when those standards are breached, we have not always done enough. The EU welcomes the unprecedented recognition of the international community's responsibility to protect populations from genocide, war crimes, ethnic cleansing or crimes against humanity.

  18.  The EU also welcomes the Summit's commitment to reinforcing the role and doubling the resources of the Office of the High Commissioner on Human Rights. Together with the decision to establish a Human Rights Council, the Summit has thus taken two other notable steps towards creating more effective human rights machinery at the UN. Protection and promotion of human rights has been reinforced as the third pillar of the UN's work, alongside development and peace and security. The EU is fully committed to work with the President of the GA and all interested delegations to complete, as soon as possible during the 60th session of the GA, negotiations on the mandate, modalities, functions, size, composition, membership, working methods and procedures of the new Council.

STRENGTHENING THE UNITED NATIONS

  19.  In his report "In Larger Freedom", the Secretary-General set member states a challenge. He called on all member states to reshape the United Nations "in ways not previously imagined, and with a boldness and speed not previously shown". The EU welcomes endorsement at the Summit of the need to reform the main UN bodies, among them the General Assembly, ECOSOC and the Security Council, with a view to enhancing the representativeness, transparency and efficiency of the system. The EU will play its part in ongoing efforts to improve the effectiveness of the General Assembly and ECOSOC. In this regard, the EU welcomes the Outcome document's provisions on ECOSOC, reinforcing the role of the Council as the principal body of UN for co-ordination, policy review and policy dialogue on issues related to development and, in particular, on the implementation of the MDGs.

  20. More widely, the EU welcomes the decisions on management reform taken at the Summit and will pursue their implementation vigorously in this session of the General Assembly. There needs to be a modernised approach to management in the UN that is based on strengthened accountability, greater transparency and more efficient working practices. It is vital that the UN's resources are channelled to the areas of greatest need and impact, and in this respect the EU welcomes the Summit decision on the review of mandates. The EU further believes that the Secretary-General needs the authority and flexibility to carry out his managerial responsibility and to re-deploy posts and resources from lower to higher priority areas.

  21.  At an operational level, the EU is determined to see, through improvements to the predictability of humanitarian funding and capacity and to standby arrangements. The current reforms which will bring the various UN agencies and programmes working in one country together under a single leader and common management are good ones. We look forward to the results of the Secretary-General's further work on strengthening the management and co-ordination of operational activities.

  22.  The EU is committed to ensuring the availability of adequate resources for the UN, while adhering to our long-standing principle of budgetary discipline. We will therefore seek to adopt an appropriate budget for 2006-07 that will enable the UN to deliver meaningful results in all its activities, including new mandates agreed by the Summit. Given the need for urgent renovation work to make the UN Headquarters in New York safe, the EU believes that agreement on a comprehensive and coherent Capital Master Plan should be taken during the current session.

Annex E

PARTNERSHIPS FOR POVERTY REDUCTION: RETHINKING CONDITIONALITY

Foreword by the Rt Hon Hilary Benn MP, Secretary of State for International Development

  Five years ago, the world agreed an ambitious plan for development in the 21st century—the Millennium Development Goals. It called for a new sort of relationship between donors and developing country partners based on a shared commitment to common goals, and to joint action to achieve them.

  There is, rightly, much debate about how this shared commitment should work in practice. President Mkapa of Tanzania has said: "Development cannot be imposed. It can only be facilitated. It requires ownership, participation and empowerment, not harangues and dictates".

  I agree, but our thinking and practice on conditionality has not kept pace with this new approach. That's why the UK Government has reviewed its policy; and is calling on the World Bank, the International Monetary Fund and other donors to do the same.

  This paper shows how donors can support policy leadership by developing countries without imposing our own views. It also sets out our clear responsibility to parliament and people to ensure that aid is not used corruptly and is well spent for the purpose for which it was intended. The right kind of partnership must have reducing poverty at its heart, alongside upholding human rights and strong financial management. The paper also highlights the importance of good economic and social policies, and of strong commitment to transparency, accountability and good governance.

  In this new approach, agreed benchmarks for measuring progress on the reduction of poverty, rather than policy conditions set by donors, will be the basis for both partners to be accountable to their citizens. The paper makes firm commitments to prevent the misuse of funds through corruption or weak financial management. It is also clear about the circumstances in which accountability to taxpayers will require the UK to consider interrupting or reducing agreed aid. It expresses our commitment to make aid more predictable and more transparent, and explores how donors can work together more effectively,

  The "Make Poverty History" campaign is calling on donors to provide "more and better aid" to help developing countries achieve the Millennium Development Goals. I see the principles in this paper as central to both objectives. By supporting policy leadership in developing countries, donors will make their aid more effective. And by ensuring that aid is effectively used for reducing poverty, donors will give their own countries confidence that more aid will be worthwhile.

Hilary Benn

1.  SUMMARY

   1.1  Our understanding of what makes aid effective is changing. Evidence and experience have challenged traditional approaches to "conditionality" (where donors make their aid conditional on the pursuit of particular policies in the partner country). This paper sets out a significantly new approach to building a successful partnership for poverty reduction, focussing on poverty outcomes rather than specific policy conditions.

  1.2  Good policy matters for development. Macroeconomic stability, growth, good governance and social inclusion are all important for long term poverty reduction. We believe that developing countries must be able to determine their own policies for meeting the Millennium Development Goals (MDGs). We are committed to supporting greater country ownership, especially of the policy process, and better mutual accountability.

  1.3  The UK Government believes that an effective aid partnership should be based on a shared commitment to three objectives:

(a) reducing poverty and achieving the Millennium Development Goals;

(b) respecting human rights and other international obligations; and

(c) strengthening financial management and accountability, and reducing the risk of funds being misused through weak administration or corruption.

  Developing country governments and donors should agree on benchmarks to assess progress in these areas. These benchmarks should where possible be drawn from national poverty reduction plans. As in any relationship, an aid partnership should be based on open dialogue, with rights and responsibilities on both sides. Each partner should take account of the views and concerns of poor people.

  1.4  In deciding how to allocate aid between countries, the UK will take account of the extent of poverty in a country, and of its ability to use aid effectively (as evidenced by the expected impact of its poverty reduction programme and its commitment to sound financial management and accountability standards). Even where the shared commitment needed for a good partnership is not in place, or is under threat (for example in some fragile states), donors can still contribute effectively to reducing poverty. In countries where the government is weak or uninterested in development, the UK will seek to provide aid in ways which build the government's commitment and strengthen its capacity. Where appropriate, the UK will also work with civil society and the private sector.

  1.5  Within a partnership, both donors and developing country governments need to agree the purpose for which aid is given. This ensures that both parties have a shared understanding of how aid will contribute to reducing poverty, and can be held publicly accountable for delivering on their commitments.

  1.6  In its aid relationships, the UK will be guided by five principles:

Developing country ownership

  DFID will support nationally owned poverty reduction plans that take account of the views and concerns of poor people. We will not make our aid conditional on specific policy decisions by partner governments, or attempt to impose policy choices on them (including on sensitive economic areas such as privatisation and trade liberalisation). Instead we will agree with partners on the purpose for which aid is being given, and will agree benchmarks to assess progress. We will draw these from countries' own plans, where available, and these benchmarks will relate to the impact and outcome of countries' overall programmes in reducing poverty, rather than to specific policies.

Participatory and evidence-based policy-making

  Both donor and developing countries should be accountable, to their citizens and to the wider global community, for showing how aid is improving the quality of life for poor people. The UK supports participation and the use of evidence in policy-making, and will press for the use of Poverty and Social Impact Analysis (PSIA). We will also encourage national debate—including in parliaments—on the relative impact of different policy choices.

Predictability

  Developing countries can use aid most effectively if they can rely on it as part of their long-term budget plans. The UK will seek to make aid more predictable by being clear in advance about how much aid will be given and the basis on which funds will be reduced or stopped. We will talk to partner countries before any interruption of aid, and will assess the impact that reducing or interrupting aid would have on the poor.

Harmonisation

  The UK will work with other donors to improve aid harmonisation and limit the overall burden of conditionality. In particular, we will encourage the World Bank and the IMF to use conditionality in accordance with the principles in this paper; and will continue to press them to monitor and streamline their combined terms and conditions. DFID will use analysis from the IMF and World Bank in making its assessment of progress towards poverty reduction. However, an IMF or World Bank programme going "off track" will not automatically lead DFID to suspend its assistance.

Transparency and accountability

  Both partners—donors and developing country governments—should be committed to transparency, and should make public their decisions and the evidence on which they are based. The UK aims to increase transparency around the process of decision-making on conditions, the conditions themselves, and the process for deciding to reduce or interrupt aid. The UK will use conditionality to ensure that aid is not used corruptly or for purposes other than those intended. In giving aid we will also take account of countries' commitment to universal human rights standards and other international obligations.

  1.7 The circumstances in which the UK will consider reducing or interrupting aid are, therefore, if: (a) countries move significantly away from agreed poverty reduction objectives or outcomes or the agreed objectives of a particular aid commitment (eg through an unjustifiable rise in military spending, or a substantial deviation from the agreed poverty reduction programme); or (b) countries are in significant violation of human rights or other international obligations; or (c) there is a significant breakdown in partner government financial management and accountability, leading to the risk of funds being misused through weak administration or corruption.

2.  INTRODUCTION

  2.1  This paper sets out the UK Government's position on effective aid partnerships. It outlines the principles we will apply in building partnerships. It explores the relationship donors should have with the policy-making process in developing countries. It sets out the circumstances in which we will consider modifying or withdrawing existing aid commitments. It signals a significant change in our thinking and practice.

  2.2  In recent years the UK has been moving away from traditional approaches to conditionality. We believe that it is inappropriate and has proven to be ineffective for donors to impose policies on developing countries. Instead, we believe that successful aid relationships must be based on mutual commitment and dialogue, transparency and accountability.

  2.3  Good policy matters for development. Macroeconomic stability and growth are essential for lasting poverty reduction. But the policies needed for poverty reduction and long term development are much broader and encompass the social, cultural, economic, civil and political rights of all men, women and children. They also include governance issues, environmental concerns and social exclusion. We will support developing countries to decide for themselves what policies to include in their poverty reduction plans. We will use our aid to back these plans, wherever possible.

  2.4  The paper has been produced jointly by the Department for International Development, HM Treasury and the Foreign and Commonwealth Office. It is based on a broad range of international experience and evidence.

  2.5  The paper is in four sections:

—  What do we mean by conditionality?

—  What impact has conditionality had?

—  The UK government's approach to aid partnerships.

—  The way forward.

3.  WHAT DO WE MEAN BY CONDITIONALITY?

  3.1  The UK applies terms and conditions through the programmes it has directly with a country (so-called bilateral programmes) and those it supports as one of many donors such as through membership of the World Bank or European Union (multilateral programmes).

  3.2  Aid agreements typically set out terms and conditions to be met by the parties. Agreements often allow donors to stop funding if there is a significant breakdown in the performance of public financial management and accountability. This is sometimes known as "fiduciary conditionality". They can also allow donors to stop funding if a country veers significantly from its poverty reduction objectives or international obligations. There is general agreement that conditionality in these areas is important, though there is debate about the particular circumstances in which it is appropriate, given the potentially adverse consequences on poor people of any reduction or interruption of aid.

  3.3  There is more disagreement around the use of "policy conditionality", where donors agree to provide aid on condition that the country pursues particular policies. Aid has often been conditional on economic, environmental or social policies, such as macroeconomic stabilisation or increased investment in health or education. Sometimes it has been conditional on specific policies such as privatisation, which have been controversial in the partner country. If the country failed to implement agreed commitments then donors have reduced or even stopped their support.

  3.4  From the. mid-1990s there has been a significant evolution in aid relationships, which has implications for the appropriate role of conditionality. First, poverty reduction has become the primary objective of development assistance, and the Millennium Development Goals have provided a new framework for development.

  3.5  Second, while sound macroeconomic policies are essential for growth and poverty reduction, there is also greater understanding of the importance of good governance in reducing poverty and conflict, and of the role of democratic participation in developing national plans to reduce poverty. For example, excessive military spending and corruption have an impact on the delivery of public services and the investment environment.

  3.6  In response, donors have broadened the focus of aid conditions from macroeconomic policies to include also conditions linked to political and institutional change, as well as social and environmental policy. Such conditions have included commitments by the partner country to tackle corruption or establish more transparent and inclusive systems of government. Donors have also been readier to include conditions about the process of policy-making, for example making aid conditional on a country's commitment to consult poor people in preparing a national poverty reduction strategy. These so called "process conditions" cover the process of policy making without specifying the content of the policy that should result.

4.  WHAT IMPACT HAS CONDITIONALITY HAD?

  4.1  Evidence on the impact of policy conditionality in bringing about policy change is at best mixed.

Have conditions been met?

  4.2  In many cases, either donors or developing countries have not kept to the conditions that they signed up to. Developing countries sometimes agreed conditions in areas of reform even though they were unconvinced of the case for change. Unsurprisingly, countries have largely ignored conditions set in such circumstances, or the reforms pursued have not been sustained. Put simply, conditionality which attempts to "buy" reform from an unwilling partner has rarely worked.

  4.3  Donors, too, have sometimes failed to fulfil their part of the bargain. Aid has been withdrawn in response to domestic financial pressures in donor countries or external political events, with limited notice or consultation. There are also frequent examples of donors continuing to provide assistance even when countries have not kept to their agreement.

Have conditions reduced poverty?

  4.4  Concerns have been raised that some conditionality has promoted reforms that have made poor people worse off. In the past, poverty reduction was not always given priority in development assistance programmes. For example, structural adjustment reforms during the debt crisis of the 1980s sometimes failed to take account of the social impact, especially on poor people.

  4.5  The spotlight has also fallen on privatisation and trade reforms. There is particular concern that in the 1980s and 1990s donors pushed for the introduction of reforms, regardless of whether these were in countries' best interests. This led to growing discomfort that developing country governments were becoming more accountable to donors than to their own people, and that this distorted national priorities in the process.

  4.6  Evidence on the social impact of privatisation policies in the area of public services, particularly in the absence of effective competition and regulation, has been a subject of much debate. In some cases, developing country governments have limited capacity to regulate the private sector effectively. There are examples where privatisation has not benefited poor people, and therefore the use of conditionality in such cases has been criticised.

  4.7  On trade reform, the evidence is also mixed. Overall, trade reforms have been important in encouraging economic growth in poor countries and hence poverty reduction. But there are concerns, for example, that aid conditions have constrained poor countries from incorporating some of the lessons of successful East Asian economies that relied on appropriately sequenced trade measures during early stages of development, and that conditions requiring unilateral trade liberalisation affect the ability of poor countries to negotiate effectively in multilateral discussions. In some cases poor people have suffered during trade liberalisation, where conditionality has been excessively restrictive, or where insufficient attention was paid to the capacity of the economy to take advantage of the opportunities of more open trade, or to factors that help poor people to benefit from trade, such as their ability to access health and education, financial services, and infrastructure.

  4.8  There has been insufficient analysis of the impact of different reforms on poor people. In the last few years, donors have recognised this gap and started supporting "poverty and social impact analysis" (PSIA) of major policy changes, This analysis anticipates and assesses the intended and unintended consequences of policy changes for the welfare of poor men and women and vulnerable groups, such as ethnic minorities, disabled people, older people and children. It covers both income and non-income measures of welfare. So far over a hundred assessments have been completed or are underway. But PSIA needs to be implemented much more consistently, and be more widely owned within developing countries. The UK is working with partners to encourage a country led approach, involving all stakeholders at each stage of selection, design and implementation, and including social and political analysis as well as economic analysis.

5.  THE UK GOVERNMENT'S APPROACH TO AID PARTNERSHIPS

  5.1  We believe that an effective aid partnership is based on a shared commitment to

  three objectives:

(a)  poverty reduction and the Millennium Development Goals;

(b)  respecting human rights and other international obligations;

(c)  strengthening financial management and accountability, which reduces the risk of funds being misused through weak administration or corruption.

  Partners need to agree the basis for assessing progress in these three areas to ensure that the partnership is achieving these shared objectives.

Commitment to poverty reduction

  5.2  The international Development Act, which came into force in 2002, makes the elimination of poverty the primary purpose of UK development assistance. DFID provides aid to further sustainable development and improve the welfare of people outside the UK.

  5.3  Within a framework of partnership, both donors and country governments need to agree the purpose for which aid is given. This ensures that both parties have a shared understanding of how aid will contribute to poverty reduction, and can be held publicly accountable for delivering on their commitments.

  5.4  Poverty reduction programmes produced by developing country governments should specify benchmarks of progress to clarify for all stakeholders the results intended from the programme, and to prompt changes in the programme if it is not leading to the expected results. We are increasingly interested in assessing whether the programme is producing the desired poverty outcomes, rather than whether the government is implementing a particular policy measure.

Commitment to human rights and other international obligations

  5.5  The UK government believes that the realisation of all human rights underpins sustainable development. States have a shared responsibility to ensure that human rights are upheld and that violations do not take place, and that governments respect their international obligations. Donors have a particular responsibility, as part of their accountability to parliament and the public, to ensure that their development assistance is not used in ways that abuse human rights. The human rights situation should be assessed on the basis of the partner country's own international human rights obligations. We will explore ways of working with partner governments and civil society to incorporate human rights-based benchmarks into poverty reduction plans and into frameworks for determining progress on poverty reduction. We will also work to ensure that our own policies, alongside those of other donors, do not impede the ability of recipient governments to fulfil their human rights obligations.

  5.6  We will also consider a country's position in relation to other international obligations, eg on peace and security?[7]

Commitment to strengthening financial management and accountability

  5.7  We believe that improving performance in public financial management and accountability is critical for building the capability of states to deliver basic services and to progress towards the Millennium Development Goals. Partner governments, like donors, are accountable to their electorates for the propriety of public finances.

  5.8  DFID is accountable to Parliament for how UK taxpayers' funds are used. We have a duty to ensure that development assistance is used to promote poverty elimination. Where aid is provided directly to partner governments through direct budget support, we evaluate the strength of public financial management and accountability and support governments to implement a programme of improvement. This should address weaknesses in the system to minimise the risk of funds being misused through weak administration or corruption. Where necessary, additional short-term safeguards should be considered in dialogue with partner governments and other donors.

  5.9  The implication of this approach to aid partnerships is that the UK will consider reducing or interrupting committed aid if:

(a)  countries veer significantly away from their agreed poverty reduction objectives or from the agreed objectives of a particular aid commitment (eg through an unjustifiable rise in military spending, or a substantial deviation from the agreed poverty reduction programme); or

(b)  countries are in significant violation of human rights or other international obligations; or

(c)  there is a significant breakdown in the performance of partner government financial management and accountability systems leading to the risk of funds being misused through weak administration or corruption.

  Any decision to reduce or interrupt aid because countries have veered from their poverty reduction objectives will be based on an assessment of the long term impact on poverty of the overall programme of the government, not on failure to implement any specific policy.

  5.10  Where a partnership breaks down, the UK will need to judge carefully whether to reduce or suspend aid. This judgement will need to consider the impact for poor people, and for longer-term poverty reduction efforts, of stopping or continuing aid. The judgement should also take into account any special circumstances, such as evidence that the breach will be reversed, or that the government is making efforts to address the problem in question. In all cases the UK will seek to talk the issues through with partner governments before taking a decision.

Commitment to key principles

  5.11  In its aid relationships, the UK will be guided by five principles:

—  developing country ownership;

—  participatory and evidence-based policy making;

—  predictability;

—  harmonisation; and

—  transparency and accountability.

  5.12  In some countries this already represents UK practice; in others progress needs to be made. We shall continue to work to make sure that the approach is applied universally.

Developing country ownership

  5.13  The UK government accepts the evidence that conditionality cannot "buy" policy change which countries do not want. Reforms will not be implemented—or will not be sustainable—if a partner country is acting purely in order to qualify for financial support and does not consider that the reforms are in its own interest. The UK will not make our aid conditional on specific policy decisions by partner governments or attempt to impose policy choices on them (including in sensitive economic areas such as privatisation or trade liberalisation). Instead we will agree with partners how aid will contribute to poverty reduction in a manner that can be sustained over the long term, and agree benchmarks to show what progress is being made. These benchmarks should focus on the impact of the government's overall programme, rather than on specific policies.

  5.14  Wherever possible we will base our assessment of partner country programmes on evidence of actual impact, since we recognise that policies have different effects in different institutional and social environments. We also recognise that in some cases where the lag between policy action and impact on poverty is long, or the likely impact is well established through the evidence in other similar country situations, our assessment may need to precede the availability of data on impact. In these cases, we will base our assessment on transparent dialogue with the partner country government and relevant stakeholders.

BOX 1: VIETNAM CASE STUDY
  
The government drew up a comprehensive strategy in May 2002 that sought to reduce poverty and encourage growth. This reform package was agreed by the government following a year-long consultation process that canvassed a broad range of views, including those of local officials.
  
Donor organisations offered their technical support to this process and were consulted on its progress. The end result was a strategy that was widely supported by the international community, but which was developed entirely by the Vietnamese government.
  
The basis of the commitments made by to government in order to qualify for Poverty Reduction Budget Support (PRBS)[8] now linked to this strategy.

  5.15  We will support broad-based country ownership of poverty reduction plans, including through processes that take account of the views and concerns of poor people. For us, "country ownership" requires that the country has leadership over its development policies. It requires partner governments in consultation with citizens to define a poverty reduction programme, which donors can support (see Box 1). We do not only equate country ownership with government ownership. We believe that civil society, including poor people, should also-have a voice and stake in their development, and that governments should be accountable to them.

  5.16  The UK aims to support country-led development and maximum country ownership of development, whilst also maintaining accountability to the UK parliament and public, and ensuring that aid is used effectively. We believe donors have a useful and legitimate role as catalysts for change, and should continue to participate in policy dialogue based on well-researched policy options. Policy matters in poverty reduction—both policy content and the policy process. If we are concerned that policy choices included in a poverty reduction strategy (PRS), or other national strategy, will not lead to poverty reduction, or might even exacerbate poverty, we will discuss these differences of opinion with our partner.

  5.17  Questions remain about the amount of genuine autonomy enjoyed by countries, given the greater financial power and technical capacity of donors in some aid dependent countries. Openness and transparency in agreeing the terms on which aid is provided and systems of mutual accountability can help to offset this power imbalance.

  5.18  Where a partner government requests technical co-operation (TC) (in the form of specialist personnel, training or research advice), this must not undermine country ownership. Partner governments will always be responsible for deciding the terms of reference for such assistance. Both donors and partner governments have responsibility for ensuring open and transparent procurement processes for the selection of consultants.[9]

Participatory and evidence-based policy making

  5.19  Both donor and developing countries should be accountable, to their citizens and the wider global community, for showing how aid is supporting sound policies, which improve the quality of life for poor people.

  5.20  To improve the quality and effectiveness of policy-making the UK will encourage participation by poor people and by parliaments in decision-making and policy-making. Civil society can also play an important role, as can the media.

  5.21  It is critical that there is a full and open national debate in a country—including in Parliaments and National Assemblies—on the relative impact of different policy options, before the government takes final decisions on the way ahead. This debate can be well informed by poverty and social impact analysis (PSIA), and is especially important if partner country governments are considering the adoption of policies which may have a negative impact, or do not have broad consensual support in the country. As part of the partnership commitment to poverty reduction, all policy choices in the PRS or other national strategy should be well researched and debated.

  5.22  The World Bank and IMF have agreed to increase the use of PSIAs for reforms which are likely to have significant impacts on different groups and on the distribution of resources between different groups. Progress is being made, but considerably more needs to be done to increase the number and to improve the quality of PSIA, to promote its ownership by country governments, and to ensure that the results of the PSIA are used effectively in the policy process.

Predictability—aid partnerships should enable predictable funding

  5.23  The UK is very concerned that aid to developing countries is unstable. Countries cannot properly plan their public policies if they do not know with any certainty how much external finance they will receive. A major reason why aid has been so unpredictable is that donors do not always make clear the basis on which they will cut or stop aid flows. And where they do have rules, they do not always consistently apply them.

  5.24  The UK proposal for an International Finance Facility (IFF) will also help to improve the predictability of aid flows. Donors would make legally binding commitments over the medium to long term to allow increased levels of aid to be disbursed in the years to 2015. This would allow multi-year funding to be agreed for recipient countries, and could therefore enable them to invest more efficiently.

  5.25  Where it is necessary to reduce or interrupt aid, we will make the decision based on criteria and processes agreed with our partner country in advance. The process will allow for a substantial period of assessment and discussion between the developing country government and donor agencies. Any planned disbursements will continue during the period of dialogue. Dialogue is particularly important when several donors have conditions in the same areas and there is a risk of countries losing a substantial amount of aid at short notice by failure to adhere to certain conditions.

  5.26  We recognise that changing planned aid disbursements within a financial year can severely disrupt the recipient's budgetary process. We will only reduce aid within a country's financial year in exceptional circumstances.

BOX 3: ETHIOPIA CASE STUDY
  
The UK and Ethiopian governments have drawn up a 10-year agreement that aims to link action on reducing poverty with progress on key issues such as justice, human rights and enhancing democracy. The initiative seeks to build a stronger partnership between the two governments by setting out their mutual commitments and expectations.
  
As part of the arrangement, there will be regular dialogue between the two sides, making the future actions of each government easier to predict. As a result, the Ethiopian government should be able more accurately to predict future aid, and the UK should have more confidence in the outcome of aid, to the ultimate benefit of the poor.

Harmonisation—donors must work together more effectively

  5.27  The UK strongly supports efforts to improve donor coordination and harmonisation. These efforts are leading to some rethinking of how donors, collectively, use conditionality and reduce the overall number and intrusiveness of conditions. The International Monetary Fund (IMF) has already moved significantly in this direction, through their "streamlining conditionality" initiative. This has clearly distinguished between the conditions the IMF sets and those set by the World Bank. The IMF has made good progress in limiting its conditions to areas that have a major impact on a country's macroeconomic situation.[10]

  5.28  The World Bank has also moved to reduce its conditionality, and this now needs to be applied more systematically. The World Bank is currently reviewing its approach to conditionality and we are contributing to the debate (see Box 4). We will continue to press both the World Bank and IMF to monitor the combined burden and impact of their conditionality and to use conditionality in accordance with the principles set out in this paper.

BOX 4: WORLD BANK REVIEW OF CONDITIONALITY
  
At the 2004 World Bank/IMF Annual Meetings, the World Bank agreed with the UK's suggestion that the Bank should carry out a review of its approach to conditionality, and report back at the 2005 Annual Meetings.
  
We have specifically asked the Bank to take a critical look at the following five issues: the scope and content of policy conditionality; the appropriate level for application of conditionality (ie overall programme or individual project); improving harmonisation and alignment behind country-owned plans for poverty reduction; improving predictability; and conditionality in fragile states.
  
In addition to a comprehensive policy statement on conditionality, the Bank is expected to publish operational guidelines for staff, and also to propose monitoring mechanisms to support policy implementation and strengthen accountability to stakeholders.

  5.29  Unlike the IMF and World Bank, whose Articles of Agreement require them to link lending conditions to their eventual economic impact, and prevent them using "political conditionality", the European Union sets its development cooperation within the framework of its overall political relationship. Under the Cotonou Agreement with African, Caribbean and Pacific countries, the EU has a clear process for dialogue when concerns arise over human rights and other political issues. Where there is a need for dialogue over issues of this kind, the UK will wherever possible work jointly with other donors, through the EU or other multilateral channels.

  5.30  The European Commission (EC) is piloting an approach that bases the benchmarks of its budget support on the impact of reform on social services delivery (such as the increase in girls attending schools) rather than the specific policy reforms themselves.

  5.31  Using outcomes rather than policies as the basis for assessing progress offers a way of maintaining accountability for the effective use of aid whilst giving countries a freer rein to choose their own policies. But there are potential downsides. Developing countries are concerned that they will be penalised for failing to achieve results for reasons outside their control, such as a collapse in commodity prices forcing a cut in education budgets because of a shortfall of revenues. There are other difficulties, such as the problem of attributing changes in performance when there are time lags in policy implementation, or where a new government takes power. In addition, accurate and timely data may not be available to determine whether outcomes have been achieved.

  5.32  The UK will be looking to learn from the EC experience with this approach, and to explore the scope for incorporating outcome benchmarks as part of an approach harmonised with other donors.

  5.33  More action is also needed from bilateral donors to limit their use of conditions. To promote respect for national ownership, and provide a common framework around which donors can harmonise, we will encourage all donors to draw the terms and conditions for their aid from a collectively agreed framework of poverty reduction benchmarks, a country's existing international human rights commitments, and a credible programme of improvement in public financial management.

  5.34  Mozambique has recently agreed a common policy matrix with 14 donors (see Box 5: Mozambique case study). We would like to see coordinated approaches become the norm, not the exception. We recognise however that not all donors and not all recipients will wish to develop a framework of support with identical terms and conditions. This may impose excessive restrictions on donor/recipient relationships and potentially increase downside risks for the recipient. It may also increase rather than reduce the potential imbalance of power between donors and recipients.

BOX 5: MOZAMBIQUE CASE STUDY
  
Total external aid to Mozambique has averaged 12% of GDP over the past decade, and is now just below 10%, compared to an Africa average of 6% to 8%. The government has a medium term objective to reduce aid dependency by funding a larger proportion of expenditure through domestic revenues.
  
External aid will still be needed for the foreseeable future, however, and DFID has made a five year commitment to support Mozambique's poverty reduction efforts. Our programme, which has more than doubled in size since the late 1990's, will reach £47 million in 2004/05 and £50 million in 2005-06. This will put DFID amongst the top three donors to Mozambique.
  
Around a third of grant assistance is provided in the form of poverty reduction budget support (PRBS), channelled directly through the Government's own systems. DFID believes that increasing the proportion of aid channelled in this way is essential for sustainability and for the development of domestic accountability. By 2005-06, some 70% of our programme in Mozambique will be in the form of PRBS.
  
The Government and 14 donor partners, including DFID and the World Bank, signed a memorandum of understanding governing the provision of budget support in April 2004.

  5.35  Donors, including the UK, have traditionally relied on an IMF programme to indicate that a country's macroeconomic policy stance and strategy are satisfactory before granting aid. A stable macroeconomic environment is critical for establishing a basis for growth, avoiding adverse effects on the poor and protecting government expenditure that benefits the poor. Our primary concern of poverty reduction places the emphasis on long-run macro-economic stability, sustained economic growth and institution building. The UK will form its assessment of progress in these areas by using IMF assessments and other sources of information. It will not necessarily require a financed IMF programme to indicate that a stable macroeconomic environment is in place. If an IMF programme is suspended (or "off-track"), we will decide whether to continue or suspend assistance according to the principles laid out in this policy paper.

  5.36  In view of the IMF's competence in macroeconomic analysis, the UK will look to the IMF to provide an assessment of a country's macroeconomic position, independently of IMF financing. The assessment will require regular monitoring and policy evaluation by IMF staff, We will seek to identify, along with other donors and partner governments, an appropriate macroeconomic standard for assessing country performance. We will also continue to assess whether IMF programmes allow sufficient fiscal flexibility to accommodate priority poverty reduction expenditure while maintaining macroeconomic stability.

Transparency and accountability

  5.37  Both partners—donors and developing country governments—should be committed to transparency. Accountability is enhanced when both make public their decisions and the evidence on which they are based.

  5.38  We are committed to increasing transparency around the process of decision-making on conditions, the conditions themselves, and the process for deciding to reduce or interrupt aid. We will encourage greater involvement of parliaments in the oversight of conditions prior to their agreement, and greater involvement of line ministries, parliamentarians and civil society in the identification of agreed benchmarks. We will also encourage other donors, including the IFIs, to be more transparent, particularly in relation to the process of agreeing the terms and conditions for their aid.

  5.39  The UK will make our own aid conditions more transparent, by publishing them on DFID's website.

Fragile States

  5.40  In deciding. how to allocate aid between countries, DFID will take account both of the extent of poverty in a country, and of its ability to use aid effectively ((as evidenced by the expected impact of its poverty reduction programme and its commitment to sound financial management and accountability standards).

  5.41  In fragile states the shared commitments for a good partnership are often not in place. The UK's focus on promoting good partnerships does not mean that we cannot work effectively in these countries. DFID has recently published a paper on working in fragile states[11] which sets out a number of ways of contributing to poverty reduction in these countries.

  5.42  Poor political governance, such as widespread human rights violations, can hasten a country's decline towards instability. Instead of withdrawing from these countries, the UK is committed to finding ways of delivering targeted, selective aid focusing on improving governance and delivering services.

  5.43  In the fragile states where we can work with the government, we should as far as possible apply the principles set out in this paper. Partnerships can be built around simple planning instruments for prioritisation and sequencing of reforms. Transitional Results Matrices are currently being piloted in some fragile states, to help apply the poverty reduction strategy principles of a unified, country-owned plan. They have an element of mutual accountability by identifying actions for partner governments as well as donors, and can provide the basis for a partnership in the absence of a poverty reduction strategy.

  5.44  In countries where the government is weak or uninterested in development, we will closely monitor the situation to identify opportunities for political dialogue. Wherever possible, we will remain involved through partners other than the government, for example supporting NGOs in the provision of services. Apart from decisions on aid, well-targeted sanctions may also have some impact on the pace of reform. Measures such as asset freezing and travel bans which target those individuals most likely to be able to influence a positive change on the ground can often help limit any wider negative impact on the population. The UK always seeks to ensure that sanctions are properly targeted and enforced, while aiming to avoid unnecessary suffering to the civilian population.

6.  THE WAY FORWARD

  6.1  The UK would like to build a new consensus across the international community on effective aid partnerships and accountability, drawing on the approach outlined in this paper. There is already significant international agreement on many of the elements. Critical to making this new approach work will be the evolution of poverty reduction plans into processes that are truly owned and pushed forward by developing countries. As the recent evaluation by the IMF and World Bank demonstrates, despite considerable progress there remain question marks about the level of genuine autonomy that countries, especially those that depend heavily on aid, have over their own policies.

  6.2  Much of the solution rests with donors. We need to take a back seat, giving more space to countries to draw up their own plans for poverty reduction. To make this happen, we need to find more effective ways to strengthen countries' policy expertise. We need to make good our commitment to support country priorities with our aid and to cut back on old style conditionality. We need to improve the predictability of our aid and increase the transparency of any conditions applied. And at a more technical level, we need to step up support for poverty and social impact analysis (PSIA), so that developing countries can make choices based on the full range of evidence.

  6.3  The UK is keen to work with our partners to make this happen. We also have more to do ourselves to put our new approach into practice, In summary, the UK Government will:

—  build aid partnerships where accountability is linked to a country's own plan for reducing poverty;

—  promote a more equal approach in which donors do not impose conditions but agree benchmarks with partners;

—  highlight the importance of good economic and social policies, and of a strong commitment to transparency, accountability and good governance;

—  promote a shared commitment to respecting human rights by donors and recipient governments, and explore ways of incorporating human rights benchmarks into frameworks for determining progress on poverty reduction;

—  encourage greater cooperation between all organisations providing aid, including national governments and international financial institutions;

—  act to prevent the misuse of funds through corruption or weak financial;

—  continue to support partner country's efforts to improve public financial management and accountability through using donor and IFI assistance;

—  continue to support efforts by the World Bank and the International Monetary Fund to streamline their use of terms and conditions when granting aid, seeking further progress from the World Bank and considering the overall impact of conditionality;

—  continue to seek commitment from other donor agencies to harmonising terms and conditions of aid;

—  promote a much greater use of Poverty and Social Impact Analysis, both bilaterally and in the International Financial Institutions to improve the quality of policy reforms;

—  consider further how to maintain predictable and stable aid flows. This will look at the issue of how to tackle political concerns about the aid relationship while avoiding interruptions to aid with very little warning;

—  develop further our understanding of effective partnerships in fragile states;

—  publish more information (including on DFID's website) about the conditions used in DFID's bilateral programmes; and

—  produce operational guidelines for DFID staff, review agreements to ensure consistency with this policy and monitor the impact of the policy over time.

GLOSSARY OF DEVELOPMENT TERMS

Millennium Development Goals (MDGs)

  The Millennium Development Goals were derived from commitments made in a series of United Nations conferences in the 1990s and agreed by nearly 150 heads of states and governments at the 2000 Millennium Summit. By 2015, we aim to:

—  Eradicate extreme poverty and hunger.

—  Achieve universal primary education.

—  Promote gender equality and empower women.

—  Reduce child mortality.

—  Improve maternal health.

—  Combat HIV/AIDS, malaria and other diseases.

—  Ensure environmental sustainability.

—  Develop a global partnership for development.

Poverty and Social Impact Analysis (PSIA)

  Poverty and Social Impact Analysis (PSIA) refers to the systematic analysis of the impact of policy reforms on the welfare of different stakeholder groups, with particular focus on poor women and men and vulnerable people (such as people with disabilities, ethnic minorities, older people and children). During 2002-03 the World Bank funded 11 pilot PSIAs, with DFID supporting an additional 8 studies. These provided the basis for a rapid expansion in World Bank-funded PSIAs and by early 2004 there were some 100 PSIA activities being carried out, with two-thirds of these based in PRSP countries.

  These studies have provided evidence to inform decision-makers and have strengthened the process of domestic policy-making. Although the total impact of these studies has not yet been measured systematically, early evidence suggests they have influenced actual policy design in Malawi, Zambia and Armenia, amongst others.

Poverty Reduction Budget Support (PRBS)

  Poverty Reduction Budget Support (PRBS) is a form of financial aid in which funds are provided:

—  in support of a government programme typically focussing on growth, poverty reduction, fiscal adjustment and strengthening institutions, especially budgetary processes; and

—  directly to a partner government's central exchequer to spend using its own financial management, procurement and accountability systems.

  PRBS is also commonly known as Direct Budget Support.

  DFID uses PRBS explicitly to link the provision of aid to the partner government's commitment to poverty reduction. Where circumstances are appropriate, PRBS is the aid instrument most likely to support a relationship between the donor and partner that strengthens the accountability and capability of the state. For further information see DFID's policy paper on Poverty Reduction Budget Support, May 2004.

Poverty Reduction Strategy (PRS)

  In September 1999, the World Bank Group and the IMF agreed that nationally owned "poverty reduction strategies" should provide the basis of all their concessional lending. In many countries, this strategy takes the form of a PRS Paper, which links debt relief to poverty reduction goals. The UK works actively with poor countries' governments to support the development of these national frameworks. We are also supporting the consultative process to ensure that PRS are built on a broad-based consensus in which the poor have a voice. Interim or full Poverty Reduction Strategies have been developed in 53 countries.

The International Development Act

  The Act came into force in June 2002. It makes clear that the sole purpose of UK development assistance is the elimination of poverty. It is illegal for the UK Government to spend development assistance for any other purposes. Our aid is "untied" in that the provision of development assistance is no longer conditional on the use of British goods and services.

IFI programmes

  This refers to programmes carried out by any of the International Financial Institutions (IFIs) concerned with development, namely the World Bank, the Regional Development Banks, and the International Monetary Fund (IMF).

Letter from the Chairman to Rt Hon Douglas Alexander MP

  Thank you for your letter dated 28 September which contained the Government response to our Report, "The European Union's Role at the Millennium Review Summit" [HL Paper 35, 11th Report of 2005-06].

  Sub-Committee C considered the response at its meeting on 13 October. We are grateful for your detailed comments and for the additional information provided, in particular the paper on conditionality. Members of the Sub-Committee have a number of concerns about the outcome of the Millennium Review Summit which they would like to share with the Government during a debate on the Report. We hope that a date for this debate can be found shortly, and look forward to engaging with ministers in a stimulating and thorough review of the European Union's role at the Millennium Review Summit.

13 October 2005

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3   Q 150. Back

4   Q 151. See also The Future Financing of the Common Agricultural Policy, 2nd Report, Session 2005-06, HL Paper 7, para 116. Back

5   Q133. Back

6   Q 139. Back

7   DFID is publishing a paper on security and development. This will consider how international obligations on peace and security should affect development partnerships. It will make clear that development assistance resources must remain focused on the MDGs, but a country's commitment to its own international obligations will be relevant in assessing whether the basis for a development partnership has broken down. Judgement will be required. For example, if a country were to adopt an explicit policy of actively supporting terrorism, this would be a clear reason to rethink our aid relationship. If, on the other hand, a country were unable to meet stringent requirements at ports of entry to check all containers for illegal arms export, we would be unlikely to use this as a justification for ending out aid programme. Back

8   For further information about PRBS see Glossary of development terms. Back

9   The UK believes that the procurement of goods and services financed by aid should be through open competition internationally. We do not tie our aid to purchases from UK suppliers. Back

10   As set out in its Articles of Agreement, the IMF and World Bank are not allowed to use "political conditionality", but can only directly link lending conditions to their eventual economic impact. Back

11   DFID (2005) "Why we need to work more effectively in fragile states", London: Department for International Development. Back