Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 120-139)

MR SUMA CHAKRABARTI AND MR MARK LOWCOCK

WEDNESDAY 24 APRIL 2002

  120. The money does matter because it says, does it not, further on "... not possible to determine the extent to which any achievement is a result of DFID's efforts, because of the numerous other factors and organisations involved in development work". So in terms of the other factors, how do you know, for example, it is not the other factors which have more of an influence than, say, the money that is spent?
  (Mr Lowcock) Can I offer an example about how we think about this? We provide a lot of money to Uganda. Uganda in the last ten years has reduced the number of people in extreme poverty from 56 per cent to 35 per cent. That has been achieved through public spending, largely.

  121. Right.
  (Mr Lowcock) Half of the Government of Uganda's budget is provided by aid and the country which provides more than any other is the UK. That has enabled Uganda to treble the number of children in primary school, to halve the incidence of HIV, AIDS and so on. When we look at particular countries and how reliant they are on aid, and the role we play, we can make what we think are plausible associations between the contribution we make and what the country is doing. If we look at individual investments, projects that we finance in addition, we have systems which require us to assess whether those projects are achieving their objectives. So we generate information through that as well.

  122. What you are saying to the Committee and to me is the expenditure of £3.2 billion is fully justifiable, fully utilised and it is right it should rise to £3.6 billion next year?
  (Mr Chakrabarti) I think the Government has taken the decision to make that increase and we think we will spend it well.

  123. Let us move on to another point that is worrying me as well. As I said originally like Mr Trickett I found the report really difficult to read. It was not one of the easiest reports. I am concerned, also, when I read a report like this that I understand it and what I think it says is what it is saying. If I am absolutely wrong please tell me and I will not pursue it but if I am right we will move on. I have written down here that it appears when we fund bilateral programmes our success rate appears to be very good but where we participate with the multilateral projects, for example, with the European Community there is not so much success. I think that has been mentioned a couple of times this afternoon. I cannot remember the damn page. Here we are, pages 18 and 19, it shows that in our partnership with the European Community there is a 38 per cent slippage in aid which is going to poor countries out of the £1.2 billion. I just asked our friend from the NAO to tell me what 38 per cent is of £1.2 billion and I have been told it is £456 million. If that figure is not right it is not my fault, it is their fault. It does seem to me to be a lot of money that you do not know where it has gone. Where has that £456 million gone?
  (Mr Lowcock) The 38 per cent figure is the proportion of the EC's money, money spent by the Commission, that they spend in countries where the average income is below about $700 a year. The rest of that money, the 62 per cent, they spend in countries where the average income is higher than that, better off countries in other words. Part of the problem we have with that is we think you do more to reduce poverty if you spend your money in the poorest countries.

  124. Certainly I would agree with that, that was one of the questions I was going to come on to. Mr Chakrabarti mentioned earlier about middle income countries and again it seems to me you should be spending the money in the countries which are the poorest rather than the middle income countries. Why these middle income countries?
  (Mr Chakrabarti) Well, they are the countries Mr Lowcock mentioned over the $700 a head.

  125. Who are they?
  (Mr Chakrabarti) For example, North Africa, Latin America, parts of Eastern Europe obviously.

  126. Right.
  (Mr Chakrabarti) There has been a big shift towards those countries over the last ten years.

  127. I am still not clear where that 456 million has gone to then?
  (Mr Chakrabarti) It has gone to those countries.

  128. It has gone to those countries.
  (Mr Lowcock) 62 per cent has gone to those countries.

  129. Why has it caused that slippage then? If you know where it has gone and it has been spent so why is it classed as slippage?
  (Mr Lowcock) It is slippage in the sense that we have a PSA target to get the percentage of EC money going to the low income countries, that group blow $700, up to 70 per cent. Because that proportion has fallen down to 38 per cent, we are slipping against our target.

  130. We will move on. It says further on in the Report that the Department is getting more and more involved in what it calls the broader sector of "budget support". This, as I understand it, is where you fund the government where the project is taking place and you rely on that government to spend the money. When I read that I shook my head a bit because this certainly worries me to some extent. Without being too critical, some of the countries—and I have got to be careful what I say—which are the most poor have the most corrupt regimes. If that is the case it would seem to me that a lot of the money is going to the poorest countries who have the most corrupt regimes who syphon off the money. Is that a problem? Does that happen?
  (Mr Chakrabarti) That is not correct. What is happening is that we are shifting some of our money to the more reformist governments who have good poverty reduction strategies. In those countries we are shifting it more in the form of budget support and away from projects. The reason for that is because in those countries they own their strategies and we are not trying to skew their choices away from what their priorities are. That is the philosophy underlying that shift. The support is not going to those countries where we have doubts over whether they can account for the money or audit the money and whether they will use it sensibly.

  131. What I have said is not said glibly. We have had examples, although they do not spring to mind this minute precisely, when dictators are toppled and their finances are in some offshore account somewhere else and they go and live in luxury for the rest of their lives. That worries me greatly. You are assuring me this is not happening with overseas aid?
  (Mr Chakrabarti) It is certainly not happening with the DFID budget.

  132. But it could happen elsewhere?
  (Mr Chakrabarti) It could if other donors do not have such strong audit systems as we do. We work very hard with NAO colleagues in thinking through whether conditions exist for providing support with safeguards.

  133. How do you check that the full amount that has been donated is spent? Do you audit that? Do you know if you have given them $50 million exactly where it has gone? Can you account for the $50 million?
  (Mr Lowcock) We do in different ways but, yes, basically. For example, in 2000 we financed an economic reform programme in Kenya. One of the things that government wanted to do was to reduce the amount of money spent on civil service salaries and increase the money spent on drugs and books and schools. We financed the bit of the programme which concerned reducing the size of the Civil Service. It involved people being given departure packages. We employed an international firm of auditors to provide an assurance to us that the money we had provided had gone for exactly the purposes that we agreed with the government it would.

  134. I will tell you why I bring this up. I am quite friendly with a Bangladeshi businessman in my constituency. I had a chat with him one day and he was telling me how corrupt it was in Bangladesh. He had family there and he had gone back and he told me about the bribes and things he had to pay and his family paid, etcetera, etcetera. Then I opened the Report and I read that there is a Bangladesh health programme and population programme which is getting £55 million. Bells go ding, ding, ding. Are you certain that that money is spent correctly? Are you certain there is no corruption?
  (Mr Chakrabarti) Whether it is project or budget support we always put in all the systems required—the analysis of the financial management systems and audit systems—to make sure that the money is spent wisely. If there are issues around the strength of those systems we will as part of the package try and improve those systems.

  135. We will move on because I have been given a time limit. I am also very interested when I read this Report to understand why we support certain countries in reducing poverty. Reading the Report I noticed—and I think Geraint mentioned this—that there are poverty reduction aid programmes for Russia and China. These countries spend billions of pound or hundreds of million of pounds on nuclear weapons and God knows what else. Why should the British taxpayer pay for poverty programmes for countries which clearly are not poverty stricken? My idea of poverty stricken is television programmes of kids who are skeletons lying on sand with flies around them with nothing to eat and no water. That is real poverty. Why do Russia and China get money?
  (Mr Chakrabarti) Because in both those countries there are quite severe pockets of deprivation.

  136. Why do their own countries not look after them?
  (Mr Chakrabarti) They do as well. Our aid programme is not very large in either country but it is very well-focused on alleviating poverty, working with partners in both countries who are designing programmes targeted at poverty reduction.

  137. Yes that is fair enough but I still do not understand why. Both China and Russia will spend hundreds of millions of pounds producing a nuclear weapon and yet there is poverty in their country. Why are they not told by the United Nations, "Look after your own people?" This sounds rather harsh but I cannot understand this when there are people literally starving throughout the world. For example, I went to a refugee camp in Zimbabwe and it was absolutely horrific with kids lying virtually dying of AIDS, and yet money is going to Russia and China who I think, quite honestly, can look after their own.
  (Mr Chakrabarti) In all the countries in which we operate we have discussions with the governments about the composition of expenditure. In the case of Russia and China the British Government, of course, lobby them to try and refocus their expenditure on the poor as opposed to some other areas you mentioned such as nuclear weapons.

  Mr Steinberg: I would like to continue but I have run out of time.

  Chairman: Thank you for that, Mr Steinberg. Brian Jenkins?

Mr Jenkins

  138. First I would like to say I applaud your programme. I think it is one of which we in this country can be very proud. We are at the cutting edge. We are trying to shape the way that aid is delivered to some of the poorest countries in the world. I hope that the European Union and some other countries come on board in their strategies on this problem. Mr Steinberg mentioned a point I was going to mention which does cause me some concern. Although you mentioned what a brilliant leadership Uganda has got, I do not know because we have no details. In the situation in Zimbabwe because we fell out with them one of the first sanctions we imposed upon them was to freeze the overseas bank assets of the ruling elite. I thought, "This is a poor country, it is getting aid, so where did that money come from to go into the overseas bank assets?" They could freeze my overseas bank assets any time! So where do they get this money from?
  (Mr Chakrabarti) I do not know where Mr Mugabe and his Cabinet got their money from, but it is certainly not British aid.

  139. I suggest that they have substituted genuine expenditure from their own economy and diverted it into their bank accounts and then they are coming to you and saying, "We have not got enough money, we need aid."
  (Mr Chakrabarti) In the case of Zimbabwe we are not providing any money through the government anyway. Because of the bad policies of the government we are freezing bank accounts and so on and we are providing money through non-governmental organisations.


 
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