Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 20-39)

MR SUMA CHAKRABARTI AND MR MARK LOWCOCK

WEDNESDAY 24 APRIL 2002

  20. Do you send anyone on short-term, six-month, gap year type projects?
  (Mr Lowcock) We do not do that directly through the Department. We do indirectly through finance we provide to non-governmental organisations. More of the Department's budget is given to non-governmental organisations than to the World Bank, including obviously to VSO, and to others as well. Many of those organisations have arrangements of that sort, offering posts on an ad hoc basis. Very occasionally in some of our overseas offices British people waiting to go to university will come and help out in the office for a period of a few months but we do not do that in a systematic way.
  (Mr Chakrabarti) One exception to that is a fast stream scheme which we have where we do send some young people for a year sometimes just to help out. That is the APOS scheme as we call it.

  21. That is just within your own Department as experience for them, is it?
  (Mr Chakrabarti) That is right. It is a young professionals' scheme. They may or may not stay with the Department. They may go into other departments or organisations, so we regard this as of wider benefit.

  22. One of the reasons I am interested in this is that it always seems to me that people tend to get a whole lot more out of their university courses if they have had some time abroad and therefore there may be some advantages to this country, quite apart from the advantages which hopefully you are going to get for the countries that the people are sent to, if we do put some of our aid into this. As well as that it seems to me that there is a case for saying that that sort of aid is actually relatively easy to monitor. If you are having difficulty working out how much good you are doing in some of the other aid you are providing, with that sort of aid you just have to know how many people there are and how long they are there for and whether it has worked or not.
  (Mr Chakrabarti) I do not deny that. You have described essentially a major conundrum in the whole development aid effort. We can of course at project or individual level monitor what they are doing much more easily than we can at country level, but we have a paradox, that we have had many very successful projects over the years and yet in those same countries poverty reduction has not progressed at the same rate, so one begins to ask whether we are really operating at the right levels with this, which is why we have made this shift in those countries that really do have these poverty reduction strategies to a much more budget support type of aid where you will see those technical assistance inputs but as part of a whole, I think, rather than separately.

  23. Do you think there is a significant difference in your ability to deliver aid and to deliver aid successfully in terms of the extent to which the people of this country will support it? I am concerned that one of the difficulties about your whole Department is that it tends to be of not much interest to most of the people in the country. We do not see a huge number of press people here this afternoon, unfortunately, and because maybe it is to some extent unpopular—you know, charity begins at home, the sort of thing that is said to any MP on the doorstep all too often: why should we give aid to anybody?—it may be that one of the advantages you could get from some of the sorts of programmes that I have been talking about is an increase in support for the whole aid effort which in turn might enable you to deliver it better.
  (Mr Chakrabarti) I do not deny that schemes like the ODI Fellowship, which I myself and no doubt others have done—indeed, the new Cabinet Secretary is an ODI Fellow—do help in terms of building support generally for the Department. I do not think that development assistance is that unpopular in this country compared with, say, a few years ago. Firstly, we have shown that it can be quite effective and, secondly, when we go round schools or we do these road shows, it is amazing the number of people who are much more interested than their predecessors would have been in what we are doing. The status of the Department, the clarity of our objective now, which is focused much more on poverty reduction than trying to have other objectives, commercial or political, has really helped that. It has made it much more attractive. We still remain the number one department for fast-streamers entering the Civil Service, and that has been the case for many years.

  24. Do you think that that increase in support for aid is partly because of people who have gone abroad and who have come back? I know that you are supporting the Link Africa organisation which sends primary school teachers to Africa and they come back and that helps some of the civilisation programmes that are now going on in our schools, primary schools particularly.
  (Mr Chakrabarti) I am absolutely sure that is part of the reason. I think more and more people are going not just through programmes like that but just even on holiday to many of the poorer countries and seeing for themselves what is happening. This is not just happening here. I went to Japan recently and it is quite interesting seeing the back-packing generation. Their attitude towards developing countries is quite different from that of their parents. They are much more interested, much more willing to engage than their parents ever would have been. I think the same thing is happening here but on a much greater scale because of our historical links with many of these countries.

  25. I thought for a moment you were going to offer me help with my holiday abroad on your aid programme.
  (Mr Chakrabarti) The Department has not gone that far yet.

  26. You were talking to the Chairman just now on some questions about governance. This also ties in to this question about support in this country for the whole aid programme. One of the things that has traditionally made people unhappy about aid is when they see it apparently being wasted, being spent on dictators' palaces or whatever. Do you accept that that is a very important reason why you need to look at governance and make sure that such things are not going on?
  (Mr Chakrabarti) Absolutely.

  27. If so, what do you do when there are sudden changes of government?
  (Mr Chakrabarti) Here or abroad?

  28. We tend not to have very sudden changes of government in this country. Perhaps that is yet to come. I was thinking more of the developing countries.
  (Mr Chakrabarti) I think the first thing is to find out what are the policies of the new government in one of these countries, whether they are sufficiently pro-poor for us to be supporting them and, if they are not, should we be supporting their poor people in some other way which is through non-government channels. We have a mix of these. Zimbabwe is a very interesting case for us right now. Here we have a government which clearly has policies which are not helping the poor of that country, but should we walk away? Our Government has taken the decision not to walk away but we will not put money through government channels in that country. We will help to provide services, HIV/AIDS testing, feeding the poor, but not through the government.

  29. If you take the number of countries you are providing aid for at the present, what per cent of the aid are you giving to them through the government channel, or are you just not giving any government aid?
  (Mr Lowcock) We are giving very small amounts of aid to quite a lot of countries. Many or most of them are not getting any direct government to government assistance. It will be through non-governmental organisations, but in terms of our departmental budget a much higher proportion of the money will be going through government to government systems.

  30. Another form of aid which is often very important in terms of those countries is what they do about energy. Energy is so important. When I was in Africa myself as a young man I was very aware of two things. First, the one thing that Africa has plenty of is sun and, secondly, there is quite a lot of growth of grass and so on which is just burnt off year by year, which had the potential, it seemed to me, for some sort of biomass energy source. To what extent are you involved in research into either of those two?
  (Mr Lowcock) We do have some research projects addressing those issues. I am afraid I cannot cite examples now. We will be happy to give you a note if that would be helpful. We also contribute to multilateral organisations which have a strong focus on that. For example, there is an arm of the World Bank, the Global Environment Facility, one of whose jobs it is to reduce climate change, for which a big issue is non-carbon based energy sources, including solar, in the tropics in particular. They have quite big programmes on that.[1]

  31. One of the reasons I am interested in this, in the same way that I was interested in terms of the people, is that it is, I would have thought, a comparatively easy form of aid to monitor. You can put in the research and you can see that products are being produced which are of use to some of these countries and you can monitor exactly how much of that is being done and how many new sources of energy are being put into those countries, and that might again be an easier way of persuading people that it is really worthwhile aid than some of this rather more nebulous aid.
  (Mr Chakrabarti) I can see where you are coming from. My preference would be, and the Department's preference would be, to work much more with a British company, for example, like BP or Shell, who are in many of these countries, to try to get them to see that there is some commercial advantage in going down the route you just suggested. We do that. We ought probably to do more of that than we do currently. There is an interesting study by the Performance and Innovation Unit which suggests that more help in renewable energy area would be very useful. I suspect this is going to be quite a big issue at the World Summit in Johannesburg in September.

  32. Mr Lowcock was talking just now about small amounts of aid going to quite a large number of countries. Is that a little bit dangerous in that we are dissipating our efforts too much and it would make more sense perhaps to try to concentrate it, particularly if lots of different countries in the EU and elsewhere are all giving small amounts of money to one country, which seems to be a rather stupid way of going about it?
  (Mr Chakrabarti) I think the general point is right. Mark might want to comment on the detail but we are trying to shift. One of the targets is of course the shift to concentrating much more on a smaller number of countries where we could have a real impact. I have come back into the Department after six years away and I notice that we have pulled out of the Pacific pretty much because these were very small aid programmes with very high administrative costs. The Japanese and Australians and New Zealanders already had very large programmes in the area, so we were not adding a great deal of value in comparison.
  (Mr Lowcock) The distinction I would make is between the countries where we are providing government to government assistance, if you like, where we are doing exactly what Mr Chakrabarti has described, where we are reducing the number of those countries on the one hand, and on the other hand where money which originates in the Department is spent in a wider group of countries because, for example, an NGO, a charity in this country, comes to us with a project and they win competitively funds for that, which can be in any country. We do not think it is a good idea to have a system which essentially bars organisations, charities in this country, from funding in countries just because we are not running major programmes there.

  33. I assume I can take it as read that if you are thinking of pulling out of a country or of giving a smaller amount to that country you do make sure first of all that not everybody else is going to do exactly the same thing next year?
  (Mr Lowcock) Yes.

Mr Trickett

  34. I did find this report slightly indigestible, so it may be that I have missed some points and no doubt you will help me if I start to ask questions which are answered somewhere and I did not quite understand. I am troubled by what I understood, which you would probably say was very little, in the sense that we have a lot of PSAs which are outfits over which we have little control, it seems to me. In some cases we are taking averages of countries which are changing year by year and therefore the amount of control we have is even less and in most cases no doubt there is a range of agencies which are contributing to the achievement and non-achievement of the targets. I am going to try to probe that in a second or two but, first of all, there is one thing over which you do have control and I do not find much reference to it in here, and that is the ratio of administration to direct assistance. Could you first tell us how much the Department spends and what ratio of that goes on administration and what goes on direct aid; perhaps the figures as well as the percentages?
  (Mr Lowcock) The departmental budget for the current financial year is £3.5 billion, of which £75 million, about 2.5 per cent, is for administration costs.

  35. And the rest is in direct grants to third countries, is it?
  (Mr Lowcock) It is in a mixture of things: grants to institutions. As Mr Chakrabarti was saying earlier, almost half the budget goes to other institutions like the World Bank, some of it goes to charities, and then a large proportion goes direct to countries. Some of it goes to, for example, to research organisations which are researching poverty in developing countries.

  36. I am going to ask you in a second what you think these PSAs cost in charges because it seems to me that this is an expensive process to produce — well, garbage in and garbage out comes to mind. If we get time I will go on to that, but just sticking with administration for a second or two, again it is striking that there is no reference that I can see to the separation of administrative costs of the recipient organisations relative to the amount of cost which is going to allay poverty. I wonder why not.
  (Mr Chakrabarti) On the administrative costs point, what we have learned is that the way we provided aid in the past, project aid in essence, was extremely costly in administrative terms, not just for us but also for the countries who were receiving this. What we have tried to do is move much more to budget support, as I said earlier, where the transaction costs for us and for them are lower. That is a major benefit if we can pull it off for both of us, and so the ratio of administrative costs to programme has pretty much stayed stable over the years; it has not risen very much at all.

  37. I am interested in admin because my experience of representing a fairly poor constituency is that the more money the Government pumps in the more well paid white collar staff and officials we have rather than making a difference to poverty. I am sure that experience is not simply the case in Hemsworth; it is increasingly so in the Third World. I am not sure I am understanding why matters which are under our direct control, which surely must be administrative and overhead costs, are not subject to PSAs rather than some of these nebulous things which frankly we cannot measure and we are frequently failing on delivering in any event. Has it not occurred to you that admin costs ought to be the subject of probably your first PSA really? The most important thing is to stop white collar staff getting more money and increasing numbers of white collar staff and that the money gets to the people living in poverty, is it not?
  (Mr Lowcock) Clearly the size of the administration costs budget is a key issue for us and we are subject to separate control by Parliament and by the Treasury on that in addition to the control that we are subject to on the programme. It is a key internal management discipline for us. In recent years the administration costs as a proportion of the total budget of the Department have not increased substantially.

  38. I do not want to interrupt you but I am thinking both of your £75 million plus the no doubt large amounts of money which are going to administration of the recipient organisations. I think you were referring to the former and the latter, were you not, in your answer?
  (Mr Lowcock) Yes.

  39. Has it not occurred to you to try to enter into some sort of relationship with the recipient bodies, and how is that monitored?
  (Mr Chakrabarti) We do that. In terms of, say, the charities, the NGOs, with some of the larger ones we have these partnership agreements, so we do not have the detailed checking that we would have had a number of years ago and that has reduced the administrative burden both for them and for us. We are essentially certifying their systems as good enough for them to take on this aid from us. Similarly, as I said earlier, in the multilateral institutions again we are providing money directly to them. It is not adding to their overhead costs. They do not have to do something extra for that money. We are saying that these institutions are good enough to use that money, particularly the World Bank, as I said earlier. In developing countries themselves, as we move away from projects to more budget support, it may be nebulous, it may seem that way, but it does reduce transaction costs on both sides.


1   Ev 22-23, Appendix 1. Back


 
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