Examination of Witnesses (Questions 120-139)|
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.
(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
(Mr Chakrabarti) I think the Government has taken
the decision to make that increase and we think we will spend
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
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.
(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 countriesand I have got to be careful what
I saywhich 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
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 requiredthe analysis of
the financial management systems and audit systemsto 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 noticedand I think Geraint mentioned
thisthat 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
(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
Mr Steinberg: I would like to continue but I
have run out of time.
Chairman: Thank you for that, Mr Steinberg.
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
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