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International Development Committee - Minutes of EvidenceHC 1680
Taken before the International Development Committee
on Tuesday 24 January 2012
Malcolm Bruce (Chair)
Mr Sam Gyimah
Mr Michael McCann
Examination of Witnesses
Witnesses: Romina Vegro, EU Policy Officer, Bond, and Jenny Brown, Senior EU Relations Adviser, Christian Aid, gave evidence.
Q1Chair: Good morning and welcome, and thank you for coming in to give evidence. It is the first formal evidence session of our inquiry into the role of the European Union as a development partner. What we are trying to explore is how good and effective it is at delivering UK development policy on our behalf. I wonder, for the record, if you could just introduce yourselves.
Romina Vegro: Romina Vegro, working at Bond as EU Policy Officer.
Jenny Brown: My name is Jenny Brown. I am Christian Aid’s Senior EU Relations Adviser.
Q2Chair: Thank you very much. To get started, the EU development budget falls under a number of different heads, and different commissioners for that matter. There is the main budget and what is then determined to be development, and then there is the EDF. I just wondered if you could perhaps give us your view on the extent to which you believe the EU general budget, from a development point of view, delivers value for money.
Romina Vegro: Thank you for inviting us today, and we welcome very much the inquiry. Especially, we welcome the fact that the inquiry recognises the importance of the EC as a development actor and donor. As you well know, the EC is the world’s largest provider of aid. It is also the main trade partner for a vast number of developing countries and a key actor in political dialogue within other international institutions, like the G20, the UN and so on. It is committed to poverty eradication and to reaching the MDGs.
We believe that EC development cooperation is effective. We think it is good value for money for the UK to channel aid to the EC. We also very much affirm the commitment of the UK Government to value for money; we think value for money is a very important element of aid policy. We think that to achieve value for money we need to ensure that we achieve longterm sustainable development, as well as shorter-term measurable outcomes. If we look at value for money in this way, we would say that it is very good value for money for the UK to channel aid through the EC, because we think that the UK can achieve much greater change and political influence through the EC than it could do by channelling aid bilaterally.
Q3Chair: I might pursue that question in a minute. Maybe you will comment, Jenny, because I will come back to you on that one.
Jenny Brown: Building on what Romina has said, likewise we affirm the importance of the debate and the commitment around value for money, but you could actually add even more value for money to the value for money you are getting by taking the longer-term perspective, specifically in terms of European Commission funding.
There are two ways in which value is added, as compared with bilateral aid. The first of those is policy reach. The Commission has responsibility not just for development but for a very wide range of other externalfacing policies, which are all capable of contributing to development. That gives it a real strength. It is not just an aid donor; it relates to developing countries in a very wide range of ways-climate change, migration, agriculture and fisheries, trade. All of those and more can be linked together. That is another angle on policy coherence for development, which we may well talk about a little bit later. This ability to bring lots of different policies together is a really important added value.
The other added value, the main one, is about coordination, efficiency and the fact that, if you have multiple donors, there are going to be multiple administration costs, for instance, which you would not get if funds are channelled through one donor. There are issues there of efficiency and coordination, which again the Commission can add a lot of value to.
Q4Chair: I suppose the question is how much influence the UK, as a Member State, can have over the core budget priorities on development terms. We know that quite a lot of the money goes to the Neighbourhood Policy, which would not be our priority, although presumably that money would be spent however it is defined, because it meets policy objectives, although they may not be development policy objectives. Also, a lot of it is spread over countries that may be regarded as middle income, which again would not be the UK priority. To what extent are we able to get the main core budget focused in a way that is more parallel to the UK? In other words, are there other Member States that would agree with us or would it have a distorting effect, because something else would have to give? What do you think of the dynamics of being able to do that?
Romina Vegro: If I may say, the UK actually has quite a lot of influence on how the budget is spent, because the EU budget-and the next Multiannual Financial Framework is being discussed at the moment and will be negotiated over the next year-is actually agreed in the Council, and the UK is one of the members of the Council and quite a powerful Member State, a big one, within the EU. The Council will take a decision not only on the size but also on the priorities of the budget, the kinds of instruments and how much money is allocated to each. The best way for the UK to have influence is to really engage in the discussion at all levels, but especially in the Council, both from the side of the FCO going to the General Affairs Council, which decides on the budget, but also from the DFID side.
Q5Chair: Can I ask either of you if there is any specific example of a situation where DFID has argued a case and made a change? It is one thing to say, "You have influence. You are a big player. People might listen," but is there any evidence of a particular element of policy where the UK has actually helped to do that?
Romina Vegro: One good example is the adoption of the European Consensus on Development in 2005. The UK was key in ensuring that the Consensus was drafted by the Commission and then adopted by the Council. The UK had a very strong influence because they engaged and put their political weight behind it.
Q6Chair: I have one final question before I bring in Michael. I take your comment, but I will give you the question and you can pick it up as well. Although the different funds are administered by the same part of the EU, the UK gave them different evaluations in the Multilateral Aid Review. The budget contribution was described as weak; the development objectives, satisfactory; and positive change, likely. How do you get three different evaluations of the same delivery mechanism?
Jenny Brown: The real strength of the EDF is the commitment to a partnership model dealt with through the Cotonou Partnership Agreement. That is the big distinction between the EDF and the general budget structures. The reason why that is so significant and why it gave the EDF the edge, both in institutional strength but also its coherence with the British Government’s priorities, is it makes sure that the recipient Governments are very heavily involved at all stages of all decisionmaking processes, so there is a real participation and ownership, which is written down as required.
In the Cotonou Agreement, there are three pillars, one of which is aid, one of which is trade and one of which, importantly, is the political dialogue. Again, that sets out a structure and an opportunity. It institutionalises that opportunity for real indepth, ongoing political relationships with the ACP countries.
Civil society is also expected and enabled to be much more a part of the processes under the Cotonou Agreement, including decisions on aid priorities, than institutionally it is with the EC budget. Obviously in practice, depending on where you are and what you are talking about, there is a lot of recipient Government involvement and civil society involvement in EC budget aid as well. The big distinction for the EDF is this partnership model. When the new Development Cooperation Instrument-DCI-is negotiated for the next few years, it would be rather nice if these principles are reinforced and built into that, because it is pretty obvious, as the Government have recognised, that they are good things.
Q7Mr McCann: Good morning. Could I continue on the value-for-money theme and ask about your thoughts on administration costs? You mentioned a few moments ago, Jenny, that by putting money through the EU there can be economies of scale, but if you look at the administration costs, for example, of DFID at 2.1% of budget, compared with 5.4% for EU development assistance and 8.6% administration costs for the European Development Fund, they do not really tally up. Do you have any view on why there is such a significant difference between the administration costs for DFID and those of the two EU structures?
Jenny Brown: The first point to make is that like has to be compared with like. I do not know enough about those figures to be sure that they are directly comparable, but there are some general principles, which include the fact that lower admin costs do not automatically generate better value for money, and often they might result in poorer outcomes, simply because the support is not there. While recognising that administration costs do need to be monitored and kept in check, we need to be a little bit careful about saying low is automatically better than slightly higher.
Again, there are issues around what sort of aid you are delivering and in what sort of context. If you are delivering aid, for instance, in a situation of conflict or a fragile state, it is going to be much more difficult and much more expensive to deliver that aid than if you are in a much more stable context. South Sudan perhaps is a good example-a very recent, very fragile state, with incomplete governance structures and so on. That is going to be hugely difficult to deliver aid into, but one would hope that nobody would say, "Because it is going to be expensive, we are not going to do it." I am not specifically answering your question, because I do not know the answer, but I would like just to flag those kinds of issues.
Q8Chair: A quick supplementary on that: the EU engages with a lot more countries bilaterally than DFID does. Is that a factor in their admin costs or do you not know?
Romina Vegro: I think probably there is a point to make in the fact that the EC engages in a number of fragile states. If we were to go back to the point that Jenny was making about delivering aid in those kinds of situations, then yes; possibly that could be a factor of the EC’s higher admin costs. It operates in some very difficult environments, which require a high level of monitoring, supporting and evaluation in order for the aid to be effective.
Q9Mr McCann: It maybe requires a bit more analysis. DFID is world renowned and is an exemplar in aid work across the globe, so it would be difficult to think that their operating costs and how they work in this country and across the world would somehow be seen to be less effective than the EU. More importantly, the British Government have also made it clear that fragile conflict states are at the heart of the programme that the Government have put forward. In terms of the Commission, there has long been a criticism, for many, many years, that it is slow to disburse aid. Why do you think that is and what do you think could be put in place to remedy it?
Romina Vegro: Do you specifically mean aid to NGOs?
Mr McCann: Yes.
Romina Vegro: The EC is a very significant donor for UK NGOs specifically. In 2009 alone, UK NGOs raised around €340 million from the EC, and this is much more than any other national platform of NGOs in any other EU Member State has been able to raise. Having said that, we can list a number of points that reflect our experience of EC aid. We have asked our members-Bond has a role to facilitate members discussing issues related to EC funding-and we have not really found that low disbursement is one of the major problems.
Aid is disbursed by two different DGs in the Commission. One is ECHO, which funds work around emergencies and disasters, and then DG DEVCO funds development projects. With ECHO certainly, there is a very fast disbursement time, because of the nature of their work. It is about emergencies, so they have to disburse quickly. With DEVCO, we found that it varies a little bit, depending on the delegations that deal with the funding. EC funding is very much managed from the country, so the EC delegations seem to have quite different levels of expertise and capacity to deal with the funding. In some cases, there have been delays, but it is not really our experience that slow disbursement is the major problem.
One point that we would raise is that EC funding has quite complex application and grant management processes, due partly to the fact that there is a very high requirement for accountability. That limits the access that smaller NGOs have to that kind of funding, because they very often lack the capacity to deal with such a complex application process and also manage the grant when they get it. Also, because EC funding usually requires match funding from the organisation itself, a lot of smaller NGOs would not have the financial capacity to match the funding. That is one of the main problems that we find.
Q10Hugh Bayley: Jenny, you made the statement that low admin costs do not necessarily lead to efficient use of aid. I understand the argument, but is it more than an argument? Is it based on evidence and, if so, who has calculated the comparability of administration costs and the impact in terms of aid effectiveness?
Jenny Brown: I cannot give you any of those formal calculations but, if it would help, I can check it out and see whether colleagues are able to come back to you on that.
Q11Hugh Bayley: Okay. Can I ask one final thing? One of the reasons, I imagine, that DFID’s administration costs are low is that roughly half of the budget is simply passed off to other donors, such as the EU and the World Bank. Is any part of the EU budget passed on to other multilateral donors?
Romina Vegro: I do not have the exact figures here but, yes, a small percentage of the EC budget is passed on to the World Bank, the UN or other multilaterals. The reason why that is, according to the Commission, is that in some cases there is no point in duplicating work that the UN or the World Bank is already doing, so it is a question of efficiency. If the UN has a very good project, for example on health in Malawi-I am making completely a wrong example-then the EC would not set up a similar project and would just put money into the existing UN project, because it would be more efficient to do so. This is the reason why the Commission channels some of its funding through other multilaterals, which is the same kind of argument that we use in the UK when we channel some UK aid through the EC. As we mentioned before, there are advantages in coordinating and not duplicating projects, and avoiding a proliferation of funders in specific areas of work.
Q12Mr Gyimah: Following on from Hugh’s point referring to your comment that low administrative costs do not necessarily lead to better efficiency, I can certainly sympathise with the general argument you made that, in areas of fragile postconflict states, you can see why the complexity could lead to higher administrative costs. However, the point still seems rather complacent. Do you have any sense of what is a reasonable level for administrative costs when operating in those sorts of areas?
Jenny Brown: I would not like to comment on that at all, because it depends so much on the capacity and experience of the donor, and also the context and the nature of the aid. I would be dangerously rash to come up with a figure there.
Q13Jeremy Lefroy: Good morning. About 85% of aid that comes out of the EU budget, as opposed to the EDF, goes to middleincome countries such as Turkey and Serbia, which has obviously been criticised as not really being aid, particularly given that UK legislation states that it is for the relief of poverty. How does the Commission defend this?
Romina Vegro: Maybe the first point is to say we are not the Commission, so we talk from our perspective.
Q14Jeremy Lefroy: Understood. I am after your perception of how it defends it.
Romina Vegro: It is true that the EC gives a lot of its funding to middleincome countries. Turkey and Serbia are specific examples that fall under the EU Neighbourhood Policy, while many other middleincome countries that receive aid through the EC fall under the EU Development Cooperation Policy. The EU Neighbourhood Policy is supported by the vast majority of the Member States, and the Member States have agreed on it. The objectives of this policy are related to EU security, to fight illegal immigration and the agreement within the EU to support countries that eventually might become members of the Union.
Q15Jeremy Lefroy: It is not really aid.
Romina Vegro: Well, having said that, for what is counted as ODA to countries like Turkey and so on-we do not really work on those areas-we would say that, if it is ODA, the objective of that aid should be poverty eradication. We focus more on the other middleincome countries that receive aid through the DCI, the European Development Fund and so on. We can certainly elaborate on that. The key objective of Development Cooperation Policy is poverty eradication and, in that sense, we think there is a need to continue giving aid to middleincome countries. I will explain why. When we talk about middleincome countries, we have to recognise that, in the last 10 years or so, a number of developing countries have been reclassified by the DAC as middleincome countries. As a result of that, today 72% of the world’s poor live in middleincome countries.
Q16Jeremy Lefroy: Can I just come back on that? My understanding is "middle income" means from about $1,000 to $13,000 a year. Lowincome countries are just zero to $1,000. It seems to me absurd that the definition of middleincome countries is so broad.
Romina Vegro: The definition is based on the GNI of the country.
Q17Jeremy Lefroy: It is so broad, between $1,000 and $13,000, so much so that they define it as lowermiddleincome and uppermiddleincome countries. It seems to me it is a rather spurious definition. I do not know what other countries within the EC, and indeed you, think of that.
Romina Vegro: I can give you a very clear example. The question here is: do we want to reach the poorest countries or the poorest people? We think the EU, as a multilateral agency that is committed to reaching the MDGs by 2015, has to reach the poorest people, wherever they live. This is what we also think as NGOs.
Q18Jeremy Lefroy: If I may come back on that, Chairman, the UK’s policy is to reach the poorest countries, and that is one of the reasons why we have stopped or will be stopping aid to India, for instance, which has more poor people than the whole of subSaharan Africa put together. It seems to me that the EU’s policy is at odds with DFID’s policy in reaching poor people.
Romina Vegro: It is, but at the same time the EC has made a proposal for the next Multiannual Financial Framework to cut aid to 19 middleincome countries within the DCI. They will also look at the EDF and see whether they want to cut that. This is a very good example of what you were talking about: this list of 19 countries includes very different types of country. It includes countries like China and Brazil, which we all know by now are donors in their own rights. It also includes countries like Indonesia, where 50.2% of the population live in poverty. That means they live on less than $2 a day, following the definition. Then it includes some Latin American countries, like Peru for example, where 15% of the population lives in poverty, but there is a very high level of inequality within the country. That is measured by what we call the Gini Index, which measures inequality within countries.
We think that the EC might be right to review where they send their funding but, at the same time, if they do so, they have to do it like DFID does, on the basis of a countrybycountry analysis that is more detailed than just looking at the GNI of the country. They should be looking at the number of poor people living in the country, the levels of inequality, and they should really be checking whether, by capping aid to those countries, they would still keep their commitments to reach the MDGs.
Q19Jeremy Lefroy: Could I just ask you both one question? This will be my final one, quickly. Do you agree that such aid to countries such as Turkey and Serbia should be classed as ODA, as the OECD says and as seems to be supported by the European Commission? I am asking you both that question.
Romina Vegro: As I said, this is not our main area of expertise, but we would say that it should be checked. If it is to do with poverty eradication, then it should be classified as aid. If it is not, it should not be classified as aid. Also, we would say that the EU, and this includes Member States, should really think about the Neighbourhood Policy and see whether the other kinds of political interests that drive the Neighbourhood Policy-
Q20Jeremy Lefroy: In the case of Turkey, of course, it is preaccession.
Romina Vegro: It is preaccession, yes.
Jenny Brown: To confirm what Romina has just said, the purpose of ODA is poverty eradication, and that is the lens through which your question needs to be reflected on, not just by us but I think by all the donors.
Q21Chris White: To extend some of Mr Lefroy’s questioning a little bit further, do you appreciate that there is a perception that too much aid is being given to middleincome countries? If you do appreciate that, how do you think that could be changed?
Jenny Brown: Yes, we certainly appreciate that there has been a lot of press discussion and public discussion in the UK, let alone elsewhere, about aid money going to apparently rich countries. As Romina has alluded to, a big part of the problem is that a lot of people do not recognise that three-quarters of the world’s poor people live in these countries. To cut aid to them would send signals of walking away from a major commitment of the UK Government, but also-given we are talking about the EU-of the European Union. The EU cannot ignore these middleincome countries if it wishes to eradicate poverty.
Going back to a comment that Mr Lefroy made, yes the definition of middleincome countries is a wide one and, as Romina has indicated, it includes a very wide range of economies and levels of inequality. That is due to the fact that the definition is based on GDP/GNI, which gives a per capita average and does not indicate the extent of inequalities. Inequalities can be economic; they can be genderrelated, geographically related, ethnicityrelated. All sorts of inequalities can render a purely economic assessment or evaluation almost irrelevant. It is a starting point, but it is a starting point for a much more sophisticated and nuanced discussion about how the European Union can help eradicate poverty in a particular country. It would do that perhaps by financial assistance. It may wish to reduce that, put more into the political dialogue, maybe more into adjusting trade relationships, which can contribute to poverty eradication-but the emphasis is on "can", as opposed to automatically "do".
There are lots of different ways in which the European Union can support poverty eradication, but it needs to do a countrybycountry analysis, using a very multidimensional understanding of poverty. Then it can be even more effective, because it is taking into account all these different considerations, and that takes us back to value for money.
Q22Chris White: Absolutely. I do think changing definitions is not necessarily going to change the life of any person or any family, but perhaps if the definitions were more accurate or precise, we would have a better starting point to deal with some of the issues. I will not mention India again, which comes up in pretty much every discussion we have around these issues. The other punchier question: which countries do you think we should stop giving aid to?
Jenny Brown: I am not going to answer that one. The reason I am not going to answer is that I do not know enough about all the countries that the European Commission puts money into to be able to make any value judgments at all, or any judgments on any criteria. It takes us back to the point that each country must be looked at on its merits. It may be that there are some countries where it is not necessary to give financial aid, provided that there is other support put in place. I can only speak in general terms on that one.
Q23Chris White: May I challenge you? I think you made a comment that could be interpreted as opinion-that low administrative costs do not equal efficiency. Would you want to use your own personal opinion on my question here?
Jenny Brown: No, because I am not well informed on that. I am even less well informed on that one than I was on the admin costs.
Q24Chris White: Would Ms Vegro want to comment?
Romina Vegro: My personal opinion, as I said before and as my colleague said, is that each country has to be looked at in detail. I am not an expert on any of those countries. The other thing I would say is that even a country like Brazil, which is obviously part of the BRIC group, has very high levels of inequality and that cannot be denied. We see it on TV every day; we see the slums. I am not an expert on Brazil or any other country, but I would say we really need to look at that and really need to consider whether, as you said, the definition of middleincome countries could be based on a wider number of factors than just the GNI of a country. If we took into account inequality, the number of poor people living in the country and other factors, then we would really have a real picture. Then we could say, "Okay, we can stop aid to this country or the other," but I do not think we are there.
Q25Chris White: My final question is: how do you see a relationship or a focus building up with smallisland middleincome countries, like in the Caribbean, for example?
Romina Vegro: Again, I am not an expert on the Caribbean, but I have been in meetings in Brussels where ambassadors from ACP countries, specifically the Caribbean group, have pointed out to the Commission that they cannot compare small islands and small countries like that. They might be defined as middleincome countries, but they have much smaller economies, which could be more vulnerable to, for example, sudden economic shocks or to disaster than countries like Brazil, China and so on. They are worried about where that relationship is going.
The other point to make is that, with the Cotonou Agreement ending in 2020, it could be that the ACP group will disappear as a group, and that the EU will focus more on Africa as a whole than on other regions. The Pacific and Caribbean countries might suffer from that, because they are a small group, and the EU links with Africa are much stronger. That is a possibility.
Q26Hugh Bayley: I am a little bit taken aback that you do not address the opportunity cost of giving aid to middleincome countries. In other words, every €1 million you give to Turkey or Brazil is €1 million that is not available to provide aid in Burkina or Mozambique. The difference is this: Brazil, Turkey, India and China have huge resources for their military and other programmes, which they could spend on poverty alleviation if they chose. If we give money to Brazil, China or India, they can reduce the tax burden on the middle class. It might even be a subsidy for the middle class. If you do not give the money to Burkina, they have no way of raising the money from other sources. Why do you as NGOs think it is for people in this country on low incomes-a pensioner on £7,000 a year will be paying tax-to subsidise or pay for poverty alleviation in countries where there are many people who have two, three or four times their income but are not making a similar contribution?
Jenny Brown: The point we have been making is about nuancing the aid and developing a much more sophisticated understanding of needs and strategies for eradicating poverty in different countries. Specifically, we are talking about middleincome countries. It may be that cutting funding is an appropriate thing to do, but our concern is that, if you cut funding, you should not be seen to be walking away from a very major problem of poverty. There are other ways, as I have indicated-political dialogue, adjusting trade relationships-of helping countries mobilise their domestic resources, helping them increase domestic resources, which you can do partly through aid, for instance helping them develop the capacity of their tax authorities so that they can collect more tax revenue. It might be, if we are talking about tax, working at a global or an intergovernmental level to increase tax transparency, say for multinational corporations, so that developing country Governments can actually see what tax they are entitled to and therefore have much more chance of getting that tax revenue. That will increase their domestic resources and give them much more sustainable and predictable revenue to develop their own education and health systems, and so on.
Q27Hugh Bayley: With respect, that is not the question I am asking. Why should the rich people in Brazil not pay for improvements to their tax system? Why should the UK pay? Yesterday, the head of our navy said we have to work more closely with Brazil because they have a bigger and more powerful navy than we have. This is not a poor country, so why do they need subsidies from the UK to improve their revenue collection system?
Romina Vegro: It might be that, once we carry out that kind of analysis, we decide that it is not the case that we will give money to Brazil any more. What we are saying is the way the Commission has drafted the list, without actually looking at many other factors apart from the GNI of the country, does not seem to us to be the right way to go. Brazil is a very different case to argue, because Brazil is one of the emerging powers, but all we are saying is that we should, before taking a decision, look in depth into how the country can-
Hugh Bayley: With great respect, a great deal of research over many years has been done. We do know that, if we give £100 million to a middleincome country that could raise that money from their own taxpayers, it is £100 million less that is going to poor people in a poor country, who have no other possible means of funding health or education.
Q28Chair: On the back of that, do your Bond members make these kinds of evaluations about which countries they should be in? That is a "no", is it?
Jenny Brown: Speaking for Christian Aid, we remain committed to working with poor communities in many of the middleincome countries. We have had programmes in, for instance, Brazil and Peru for many, many years. We have no intention of pulling out of those countries, because the level of poverty is still extreme. We work with local organisations and networks partly to help people deal with the symptoms of the poverty, the actual experience of poverty, and increasingly to challenge the structures in-country that are maintaining those people in poverty.
Chair: You have made your case. Obviously there is a difference of view there.
Q29Mr Gyimah: Moving on to economic growth and the private sector, where you have expressed opinions, one of the comments that Bond has made is: "The Agenda fails to recognise that increasing levels of economic growth will not automatically deliver desired development results. [It has a] narrow focus on GDP-led growth and a reliance on ‘trickle down’ effects of private sector development alone, without full consideration of environmental and social impacts." That said, the focus on growth and private sector development in the Agenda fits in very well with where DFID is coming from. What exactly are your concerns about this?
Jenny Brown: First of all, we would say that economic growth is essential for development. The private sector, as an engine for growth as a driver for development, is also necessary. It is a necessary means of wealth creation, and that is a very important starting point. We welcome the fact that, in the Agenda for Change, there is an increased emphasis given to economic growth as relevant and potentially very helpful for development. We are also very pleased to see that nontraditional donors and development actors, such as the private sector, are recognised as being very important. That is a good starting point and it gives a very good opportunity to enter into a debate about how, in practice, economic growth and the private sector can be instruments for development.
If I perhaps talk briefly about economic growth, on its own it does not automatically lead to sustainable development and poverty eradication. It certainly can. The right type of growth can, but the wrong type of growth can be very detrimental. If I may use an example from India, India’s growth has been very rapid over a long period. However, Uttar Pradesh has a GDP per head that is close to that of Kenya. At the other extreme, you have Chandigarh, which had a GDP at 2009 that was something like $9,000, which is very much at the top end of the range you were talking about. There was some research by Son and Kakwani in 2008, which confirmed that there is no necessary relationship between economic growth and a propoor outcome. It can happen; it may not.
The challenge is actually that there is not that much information at the moment that tells us exactly how to achieve economic growth that will automatically lead to poverty reduction and eradication. That is something that perhaps the European Commission could usefully undertake, and really investigate what sort of economic growth will help development and how you achieve it. Would you like me to go on to the private sector briefly?
Q30Mr Gyimah: If you could, please. Thanks.
Jenny Brown: As I say, we are very happy to see the private sector identified as a key actor in development. Many Bond members, including Christian Aid, have been working increasingly closely with the private sector on developmentrelated conversations and, in fact, projects.
One of the really important things to note, which did not come out very well in the Agenda for Change, is the diversity within this concept of private sector. It needs to be acknowledged that the private sector goes from big multinational corporations, right the way down to very small farmers, cooperatives and all sorts of things at the very, very small local level in developing countries, and then the full range in between. All of us have to be very careful when we talk about the private sector to be clear what sort of private sector we are talking about, because the opportunities are different and the ways of engaging will be very different. I am conscious I am talking a lot. I could give you one or two examples, if you wanted. Shall I stop?
Q31Mr Gyimah: No, give me two examples.
Jenny Brown: This is from Christian Aid’s perspective, because that is what I know best. We have been working in Kenya with the Fairtrade Foundation/Practical Action to look at the honey value chain, because honey is something that local farmers can produce; it is a great opportunity for income generation. What we have been doing is looking at ways of addressing issues in the value chain and supply chain to make sure that the producers of the honey actually get the most value for their product, and also helping them become less dependent on one. When you are talking about transforming value chains, that is private sector; that is not just doing a project in a small community. This has real added value and can ultimately transform the sector. There is a real role for the private sector there.
Q32Mr Gyimah: Thank you for that. Just a quick supplementary and then I have another question for you: I hope I am not wrong in inferring from your case, which you have made very clearly, that your main concern around the private sector is more around a suspicion, rather than any sort of evidence base, that focusing so much on the privatesectorled economic growth could lead to unsustainable growth. Am I right or have I misunderstood?
Jenny Brown: You may have misunderstood. "Suspicion" is probably not quite the right word. We see a lot of opportunities for economic growth being a driver towards development. We also see a lot of actual experience of the private sector, at different levels, contributing something very important to the development process, either globally, where more and more companies are willing to talk about countrybycountry reporting, for instance, and tax transparency, or domestically. I am sorry if you got the impression that I was being suspicious. What I actually want to do is be very affirming of those opportunities.
I cannot at the same time say, working with the private sector, that what the private sector does, in all respects, is always going to lead to a sustainable development outcome. What I am saying is that there are a lot of opportunities for that to happen. We as civil society, the European Commission and individual Member States need to engage in an affirming but nuanced way and really think through opportunities. Part of it might be about changing the behaviour of business to help them understand the development implications and opportunities of what they are doing. More and more businesses are signing up to the triple bottom line-really going beyond financial results in the way that they evaluate themselves-and that is good. There are a lot of trends there that are to be encouraged, but we need to be aware that it does not automatically follow.
Q33Mr Gyimah: The final question from me: do you think the Government should support the Agenda for Change, and what other changes would you like to see before it is agreed by the Council in May?
Jenny Brown: The strengths of the Agenda for Change are, first, that it contains an absolute restatement of the commitment to sustainable development and poverty eradication. That is restated in an unqualified way. Also, there is the commitment to policy coherence for development, which is a fundamental principle, as we have mentioned earlier, bringing all the different externalfacing policies together in a coherent supportive developmentfocused way, so there is a much more effective outcome and greater value for money. It is all linked with that debate. The basics in the Agenda for Change are absolutely to be affirmed and encouraged.
Some of the points about the middleincome countries’ growth and the private sector are dealt with quite briefly, because it is inevitably quite a short document. What would be helpful would be for the UK Government, as a response to this, to encourage some fleshingout of these principles and encourage the thinking, "Where are the opportunities? How can we, as a Member State, and the European Commission really use these principles to achieve even better outcomes than have been achieved over the last few years?" Those would be my big points, but the short answer is yes: support the Agenda for Change with those caveats.
Q34Mr McCann: I asked earlier if you had a view on whether the EU was slow to disburse aid. That seems to be borne out by the fact that, in 2010, its target of 0.56% was not met; it was only 0.43% that was spent, so they were €15 billion short in 2010 of spending what they had available. I just wondered if you had any view on the reasons for that and, if you do have a view, how you would remedy it.
Jenny Brown: I am not able to comment on that.
Romina Vegro: If I understand properly, in 2010, the Commission did not spend all of the money.
Q35Mr McCann: The budget that was set aside was 0.56%. It spent 0.43%. It did not spend €15 billion that it had available to it.
Chair: Sorry, Michael, but I am not clear on whether the money was available. It was a target.
Romina Vegro: I can get back to you on this. If it was a target, I assume that what was spent was what was needed, but I will get back to you.
Q36Chair: Part of the point is to what extent it was underspent. To what extent did it not get the money from Member States?
Romina Vegro: Sorry, are we talking about the EC budget or the whole EU budget?
Romina Vegro: Then it is because the Member States did not respect their commitments. Is that what you are talking about-the commitment to reach 0.7%?
Q37Jeremy Lefroy: 0.56%.
Romina Vegro: 0.56%, yes. That is a major issue and there are a number of Member States that are off-track. We very much commend the fact that the UK is on track, even though, of course, the economic crisis has hit the UK, as well as other Member States. One way that we see for the EC to maybe force the Member States to contribute a bit more is through the next Multiannual Financial Framework. If the proposal that the Commission has made for an increase in heading 4 is agreed, which is the section of the budget that deals with external action including development, the other EU Member States will automatically increase their aid spending, because they would have to contribute. Their contribution to the EU budget is compulsory, so they would contribute more money, which is ODA in effect. We think that the UK should support that increase to heading 4. We understand that the position of the UK and many other Member States is to keep the budget to the levels of 2011, but we would say that, by cutting headings 1 and 2, which are two very big headings, by a very small percentage, we would get the funding to increase heading 4.
Q38Hugh Bayley: For several years, the Commission has been talking about the importance of policy coordination across EU policies. What impact do you believe its policy coordination has had over recent years, say over the last five years? Can you give any examples of changes to policy that the EU has brought in to create better coherence for development?
Jenny Brown: One example is the tax and development communication that was produced in 2010. The significance of that, from the perspective of policy coherence for development, is that it was the first time that DG Taxes had worked with DG Development, recognising together that tax is a major issue in development and that various aspects of taxation, corporate transparency and so on, actually have a big role to play in helping developing countries access their own resources. This communication really reinforced that link in a way, as nobody had really thought about tax and development in the same breath, let alone in the same communication. That was really very encouraging.
Since then, the European Parliament has taken on a legislative process to take forward some of the principles in that communication, including around corporate transparency, countrybycountry reporting and so on. That is a very positive outcome. I understand that, in the Accountability Report for 2011, another aspect of the provisions of the communications is being taken forward, which is the European Commission helping fund capacity building for tax authorities in developing countries, so that they can actually handle the taxraising process more effectively.
Q39Hugh Bayley: To what extent have these new policies increased the tax take in developing countries?
Jenny Brown: That I do not know. This is all very new. Many tax authorities in developing countries would actually take a little bit of time to get the right level of resources and competence in order to start achieving. This is work in progress, but it is very encouraging work in progress. If it had not been for the tax and development communication, it may well not have happened.
Q40Hugh Bayley: In relation to climate change and trade particularly, the EU is still, in effect, with the United States, blocking the Doha Development Round, because of its obsession with subsidising agriculture.
Jenny Brown: In practice, we are not aware of a lot of very good examples of policy coherence for development. Over the last few years, since the consensus for development, which really got it in writing for the first time, there have been a lot of institutional commitments and a lot of thinking going on about how it can work but, so far, you are right: there are actually quite a lot of difficulties with, for instance, trade relationships. For instance, the economic partnership agreements and free trade agreements with Central America, Colombia and so on seem to be very much pushing an export model, which may well contribute to growth-going back to the previous point-but does not necessarily reach down to benefit the small farmers and producers, who are not in a position to engage in the export side of things.
There are difficulties there, but we take encouragement from the fact that there is so much more discussion of policy coherence for development in Brussels. All the institutions, including the External Action Service, are committed to making it happen. I suppose it is for people like us to encourage them and, one hopes, for Member States as well. I would support it and say this is really important. It is really good. There are signs of progress. Let us just build on those.
Chair: Thank you very much. Can I thank both of you very much for coming in and giving us that evidence? If there are any additional questions you can fill out by writing to us afterwards, we would appreciate your doing so. Indeed, if there is anything you reflect on that you think you would like to add to, please do that as well. Thank you both very much indeed.
Examination of Witnesses
Witnesses: Stephen Booth, Research Director, Open Europe, Simon Maxwell, Senior Research Associate, Overseas Development Institute, and Siân Herbert, Research/Project Officer, European Development Cooperation Strengthening Programme, Overseas Development Institute, gave evidence.
Q41Chair: Good morning. Thank you very much for coming in. I appreciate we are one witness light and have one witness change. Perhaps starting with you, Stephen, you could introduce yourself and just explain.
Stephen Booth: My name is Stephen Booth. I am the Research Director at Open Europe. We are a thinktank based in Westminster and Brussels. We look at all areas of EU policy, not just this area. I apologise on behalf of my Director, Mats Persson, who unfortunately could not make it today. He had another urgent meeting that came up, which unfortunately clashed with this one. He apologises for not being here.
Simon Maxwell: I am Simon Maxwell. I am a Senior Research Associate at the Overseas Development Institute, where I lead a programme of work on European development cooperation, which is independent and politically neutral. I apologise on behalf of Romilly Greenhill, who is the coauthor, with Siân, of the memorandum of evidence, but is not able to be here. I should declare an interest: I am also an adviser, as you know, to the Committee.
Siân Herbert: Hi, I am Siân Herbert. I am a Research and Project Officer at ODI.
Q42Chair: Thank you very much. You obviously have heard the questions, and we are going to go over similar ground but presumably get a different take or different perspective. The first point that has been exercising us is the fact that we give a substantial amount of money to the EU for development funding. Two thirds goes to the general budget, and one third to the EDF. Clearly, we have less control over the general budget. It does not rate DFID’s objectives as clearly as the EDF. The question is: to what extent would it be beneficial for us to shift that balance? I do not know whether it is possible to put less into the budget, given the arguments about the budget, or more into the EDF. Are there any contexts in which you think we should shift the balance? Maybe we should ask Stephen first.
Stephen Booth: That is what we argued in our evidence and our report that we did on this last year. Given the EDF tends to fit the UK’s objectives better and the fact that DFID seems to suggest the reasons for that is because the contribution is voluntary and, therefore, there is more conditionality-we can basically withhold the money if we feel that the fund is not going to achieve objectives that we agree with-we argued that the UK should seek to negotiate a relationship where all funding to EU aid is on a voluntary basis, rather than through the main EU budget.
Q43Chair: You are suggesting, I suppose in an extreme way, that the UK Government should turn up and say, "We do not think the EU budget should pay for development at all. It should be taken out. The budget should be reduced and the money should be put into EDF instead."
Stephen Booth: Yes. The EU budget has various strands. Looking at things like preaccession funding, that is something that should legitimately be funded by the EU budget.
Q44Chair: It should?
Stephen Booth: There is a legitimate case for that specific strand, because it is something that is core to the EU as an entity. It is about getting countries to fulfil the criteria to accede to the EU. That makes logical sense.
In other areas, where the money is aimed at development per se, the argument for making it voluntary is that you therefore have greater control, are able to target it better and make the objectives clearer. There is a strong case for that.
Q45Chair: I understand the argument. On the latter point, which will be my second question, if you did agree that the preaccession funding should continue to go through the budget, the problem we have with that is it would still be identified as development assistance by the OECD, so it would still mean that a significant chunk of UK funding through the general budget would be going into ODA.
Stephen Booth: There is a difficulty with that. That is not a problem of the EU; that is an issue for the OECD. When we started engaging with the Commission about this issue, about how much money goes to middleincome countries versus lowerincome countries, for example, they said it is unfair to include things like preaccession funding or the Neighbourhood Policy, because that is not what they are designed for. At the same time, they also say that the EU is the world’s biggest aid donor and we spend 96% of our budget on ODA. They cannot have it both ways, I do not think. At some point, there has to be some way of reclassifying it, although I am not sure how you go about doing that. It has to be made clear to the taxpayers and the people who are accountable for this money what the money is actually being used for. The Commission is guilty of trying to have it both ways when it comes to reporting its aid statistics.
Q46Chair: Perhaps I can ask ODI if you have any sympathy with that approach. Would it be achievable if it was deemed to be desirable?
Simon Maxwell: I speak for myself and not for ODI, which does not take institutional positions. If I may leave aside the voluntary question a minute. You are right to say that DFID, in its Multilateral Aid Review, scored the EDF much higher than the development part of the budget. It also scored ECHO, the humanitarian programme is funded from the budget, very highly. What the Commission is proposing is a 19% increase in the DCI in the next financial framework, and only a 13% increase in real terms in the European Development Fund. Given DFID’s ranking of these instruments, that seems surprising. The commission has also proposed that the contribution key, in other words the percentage that each Member State should contribute to those various instruments, should be equalised across the various windows.
The question is: should DFID try to increase the growth rate of the EDF in the negotiation and hold down the growth rate of the budget? It would be a logical consequence of their assessment that they should do that.
Q47Chair: Just to probe that a bit further, is it not the case that the Commissioner is presumably trying to say, "But I have my Agenda for Change. Therefore, if you give me the money, it is going to be much more development focused than it has been in the past. It is going to be much closer to DFID’s requirements," because he wanted to merge them originally but then decided not to. He is going to say it is not going to make any difference; you are going to get the outcome you want.
Stephen Booth: There is a key part of Agenda for Change, which Siân may say something about, which is differentiation, which is cutting 19 countries off the list of aid recipients. Even after that is done, it is going to be the case that the DCI is much more orientated to middleincome countries than the EDF.
Q48Chair: Maybe you want to comment on that, Siân, but from that you would conclude that DFID is perfectly right to argue that the EDF is the better vehicle, and the balance should be, as far as possible, for EDF rather than the other.
Siân Herbert: I actually would not argue that. Again, I do not take an institutional position; I think they are complementary. The EDF is a very different budget from the EU development budget, and it has a different focus, looking at ACP countries-African, Caribbean, Pacific-which have many more LICs, or lowincome countries, and LDCs. It is a bit of an unfair comparison in a way, because they have two very different geographical focuses. What Simon just mentioned, differentiation, is one of the key parts of the new Agenda for Change. That will quite change the DCI, which is the instrument most similar to DFID in the sense that both the DCI and DFID put poverty reduction at the forefront. Differentiation will not apply to preaccession findings or the Partnership Instrument, which deals with wealthier countries.
Differentiation is basically looking at different ways of dealing with middleincome countries. As we heard from the previous two speakers, we have a different poverty landscape-75% of the world’s poor are in middleincome countries-so we have to rethink how we deal with those countries. If we want to reduce poverty and reach poverty goals, we still have to cooperate with those countries but not give bilateral aid in many cases. As Simon said, 19 countries will have bilateral aid cut from 2014, which includes countries like Argentina, Uruguay, Colombia, Costa Rica, Ecuador, Kazakhstan and India, of course, as we know well here. The reduction in aid to these middleincome countries, will free up about €2 billion over the next multi-annual financial framework, which will go back into funding for other countries in the DCI. There will be a better poverty focus. However, it is a different instrument from the EDF, and the countries it covers include fewer LICs. We have to recognise their differences.
Q49Hugh Bayley: There are two separate but related issues: one is how effective or otherwise the EU is at targeting aid on poor people in poor countries on the UK agenda; the separate but related issue is how effective the EU is at encouraging member states to be donors and, hopefully, good donors. Our perspective from the UK is we are committed to a high level of ODA, and we in a sense have a choice, as Stephen is arguing, between whether we do it ourselves or through a multilateral like the EU. Do the recently acceded states-Slovenia, Malta, Poland even-have a track record? Do they know a lot about development? The answer is it is much better for them to pay into a fund managed on their behalf. Stephen, if you were to-is this the right jargon?-unbudgetise the DCI, would you not run the risk that actually you would reduce the development contribution of states other than France, Germany, Britain, the Nordics and the Dutch, which have a history and commitment?
Stephen Booth: I see your point. I think it is a legitimate argument. You can have the EUlevel targets, which we already have. They are obviously not being met, as was being discussed earlier. Conversely, looking at it in terms of whether you want to have public support for aid and taxpayers to support the idea of giving aid, getting the money through coercion-which essentially is what you are doing by bringing it through the EU budget, because you are basically saying you have to contribute X a year-has the potential to delegitimise the whole idea of giving aid. You want to have taxpayers’ support for it, public support for it, and also accountability, in terms of who has their hands on the purse and whether you can vote them out of office. Once you start budgetising everything, that is the downside of it.
I do take your point that there is a risk that it may decrease from the countries that do not have a record of it or do not have an international network, for example, for giving bilateral aid. However, if you still have an EUlevel fund that is voluntary and say, "You have to meet your aid target"-if you sign up to an EUlevel aid target, one of the options is giving to a voluntary EU fund or you can give money bilaterally-there is no excuse, really, for not meeting your target. There are options available to you. If you choose not to do it, you are breaking your EU commitment. I think that is a fairly decent proposal to give people. If they choose to break it, they choose to break it.
Q50Hugh Bayley: Can I put almost the same question to Simon? At Gleneagles, it was a clear, stated UK policy that we intended to increase our aid, but we also wanted to leverage in greater aid contributions from others, including other EU member states. Do you think the compulsory nature, at least of the DCI, helps the achievement of that UK policy goal, if it still is our Government’s policy to encourage others to become good donors?
Simon Maxwell: I do not accept the contributions to the EU budget are, in any sense, compulsory, at least in the sense that one might use that word in normal language. The budget is an agreed document that commits member states only after thorough review. In general, in answer to your question, it is true that the smaller developing countries are able to perform more effectively and on a bigger stage if they work through Brussels, rather than independently. They do bring their own perspective, particularly on the history of transition. They have great expertise on Eastern Europe. They have more expertise, often than we do, on the Mediterranean, for example. The other factor to take into account is that there are too many donors in the world. We do not need lots and lots of small donors all trying to tell the Government of Ghana how to run its health policy. There is a strong case for multilateralism simply in order to reduce transaction costs. A recent study carried out for the Commission demonstrates that there are real savings to be made if the number of countries that are covered by individual donors can be reduced. Multilateralism is one way to do that.
Q51Mr McCann: That ties neatly into the next question then, Chair, because I have one club in my bag this morning; I am dealing with administration costs, as you will probably have gathered. There is an argument that we are exporting our overhead, given that DFID has an operating cost target of 2.1%, the EDF is running at 8.6% and the general budget at 5.4%. We heard from the previous contributions that might not be a like-for-like comparison. What are the differences in your view? Why is it so high? Should we expect those costs to decrease? If there are efficiencies to be achieved through multilaterals, why is it that administration costs are so high?
Simon Maxwell: Let me say something about that, but Siân has been working more on admin costs than I have. First of all, we all have to be really careful in how we look at admin costs, partly because Ministries and aid agencies across the world classify costs in different ways. For example, DFID, because it has been trying to hold admin costs down, has been looking very hard at the balance between admin costs and programme costs. I have one example to give you here, which is that in 201011, 615 people were reclassified from admin to programme at a cost of £27 million. In the previous year, 703 people were reclassified at a cost of £32 million. If they had not been reclassified, DFID’s admin costs would be higher.
Q52Chair: How much higher?
Simon Maxwell: In this particular case, if we add the 27 and the 32, we are talking about £59 million. You were told in the previous session, rightly I think, by colleagues from the NGOs, that the EU is covering a large number of countries: over 140. It has a very wide range of programmes, some in very difficult circumstances. The average for all donors in admin costs is actually about 8% to 10%, according to a recent literature survey.
In a way, a more interesting point about the Commission’s admin costs is what kind of capabilities they have. If you compare the Commission with DFID, they have an extraordinarily weak capacity to deal with policy issues. DFID has a policy division with a staff of over 200 people. The equivalent department in Brussels has a staff of fewer than a dozen. As a result, the Commission is tremendously undergunned in looking at the big development challenges and how to deal with them, relying far too much on external consultants. I would love to see a capacity study of the EU Commission. There are something like 4,000 staff working for the Commission on development, on the numbers that we have, compared with 2,500 for DFID. But are those the right staff doing the right jobs?
Q53Mr McCann: I could take the view that, accepting the point that DFID may be taking a position, there is a manipulation going on in terms of where the money is coming from. That has been going on for years, in terms of programme costs, project costs and various other things. What would you reckon, if you were making a best guess, you could save in terms of the European administration costs? Maybe Stephen wants to comment on this shortly; you have explained that the series of transfers that take place mean that everyone is taking a slice of that action. How can that be streamlined and how could it be made more efficient?
Stephen Booth: There are two issues. The first obvious point is the fact that the Commission gives money to other multilateral organisations. That is a needless transfer. If the UK wanted to give money to the UN, why does it go to the EU first? Everyone can understand that does not make a lot of sense.
On the point that Simon made about DFID, for example, having a greater number of people working on the specific policy aspects of development, that is an illustration of how different EU countries have different capabilities. The UK has a very advanced development capability. Therefore, I think the Commission’s role should be to use that best practice as a mechanism for dragging other countries up. Why replicate it at the EU level? Why have another 100 people doing policy at the EU level if one of the member states already has a very good record on doing these things? Why not use that rather than try to replicate it in Brussels? The Commission also has its own issues with administration, not just on development; I think the Commission has its own inefficiencies across all policy areas, probably more so than the UK civil service.
Simon Maxwell: May I make a factual correction?
Mr McCann: Yes.
Simon Maxwell: It is actually the case that the Commission only spends 2% to 3% of its total funding through other multilaterals, which is much lower than DFID, and that is one reason why the Commission’s costs are high. In a way, DFID is a wholesaler and the Commission is a retailer. Why is it wrong for the Commission to have a budget that it can spend through multilaterals? The EU speaks for all the member states on issues such as trade. It has an important role to play on climate talks. If you are entering into a negotiation, you have to ask what is in your armoury. Often one of the most important weapons is money. For Connie Hedegaard, for example, to be able to engage in the climate talks in Durban successfully, as she did, it is important for her to know that she has climate finance available to assist in that negotiation.
Q54Mr McCann: Why is there a difference of 3.2% in the operation costs between the general budget and EDF?
Simon Maxwell: The general budget covers all aspects of EU work, including administering the Common Agricultural Policy, the Common Foreign and Security Policy and so on. The aid programme is running country offices in over 140 countries, and that obviously has a cost.
Stephen Booth: I think they are slightly separate issues. The EDF is obviously a separate fund. I looked at 2009 figures; I can supply you with the figures later, if you like. As I remember, the admin figure for the development side of the EU budget was around 5.4%. Again, I can get you the figures on how much money was given to unilaterals as well. Maybe we can compare notes afterwards. I am not sure it is as low as 2%.
Q55Mr McCann: Can I ask you a direct question, Stephen, just for my final question? I think you have touched upon it in one of your answers. It was: how widespread is the practice of redisbursing funding to member states to spend on behalf of the EC? If I have got you right in terms of the last answer, you think that is a good idea.
Stephen Booth: What you are referring to are delegation agreements, whereby the Commission can either delegate money back to the member states, or member states can delegate money to the Commission, if either feel that they are better placed to spend the money. It is not a big sum of money at the moment. I think it is in the hundreds of millions, and these agreements have been going for a period of years. What they illustrate is that the basic rationale behind the EU budget is to centralise the financing; it is to get the money in the pot first, and then decide what to do with it. If you look at delegation agreements, there has been far more money delegated back to member states than there has been money delegated to the Commission from member states. On that rationale, the logic is then surely that the money was better spent by member states, so why hand it to the EU in the first place? Again, it is not a big sum of money at the moment, but it shows you that the logic surely is flawed, if the money is being handed to the EU first. Of the delegation agreements that have been made, so far, more has been sent back to member states. That illustrates the wider point.
Q56Mr McCann: There are unnecessary transactions taking place.
Stephen Booth: I think the total amount was around 290 million that was delegated back. Again, I can confirm the numbers with you.
Q57Chris White: Thank you. That was a very interesting point you just made. It would be interesting to have some detail on that. My question would be: do you think the EC should be reducing the number of countries it has development cooperation agreements with? If you think that is the case, how would you go about making that change?
Simon Maxwell: Can I ask Siân to answer that question for us?
Siân Herbert: I am absolutely in support, of reducing the number of countries. This again comes as part of this differentiation policy. Like I said, 19 countries will have their bilateral aid cut. They may still get aid through other thematic programmes. There are exceptions, for example, South Africa will continue to get bilateral aid, which is probably a sign of the UK’s influence, perhaps, through the EU. That is a side point.
Other countries could get money under thematic programmes. If, for example, Brazil has an interesting climate change project, it could get funding under The Global Public Goods thematic programme under the DCI, but there will be no bilateral funding going to those 19 countries. The EU has projects in 140 countries, which really is a lot of places. It can only be good to specialise those efforts. I agree with that.
Q58Chris White: Do you think that the EC has a comparative advantage in dealing with some countries that the UK might not have?
Q59Siân Herbert: Absolutely, yes. In particular, we were talking about preaccession funds. It is a difficult statistical problem with ODA qualifications that funding going to those counts the same as funding going to other poorer countries but, of course, the EU has a massive comparative advantage in our direct neighbours, in helping them accede to the EU, which is in direct alignment with DFID and UK interests. Also, particularly in the light of the Arab Spring in the neighbourhood, there is a real comparative advantage that the EU offers in terms of development. That is going to be the big agenda going forward. It has been for the last year and that is going to continue.
Simon Maxwell: If I may add something, DFID is an agency that has global ambition and global reach, but has decided to limit its immediate geographical work to 27 countries plus South Sudan, I think-28. The papers this week have contained news of an impending famine in Niger. Niger is a country where we do not have a large bilateral programme, but where the British public and DFID would like to see something done. The way to get something done in that circumstance is not then immediately try to mobilise a large British bilateral programme, but to work through our multilateral partners. That includes the World Food Programme, of course, but also ECHO, which is particularly good at dealing with shortterm emergencies and is our instrument for dealing with countries outside the 28.
Q60Chris White: That is an interesting point, but do you think the latter direction-not going alone, so to speak-is as flexible or as responsive as we can deliver as a country responding to, as you correctly point out, something that the public would support?
Simon Maxwell: There has been a huge investment in improving the quality of multilateral emergency assistance. WFP is very highly regarded in the humanitarian system and was so rated by the Humanitarian Emergency Response Review last year, which I sat on but which Lord Paddy Ashdown led. The same is true of ECHO, which was very highly rated in DFID’s Multilateral Aid Review. We have created these instruments. We fund them. We should not then try to duplicate them.
Stephen Booth: I would agree with most things that were said. This was a positive move to focus on less and try to do it better. I think that is generally a good idea. Simon mentioned the emergency fund, and given that DFID thinks that it has quite a good record, and it is an area where, if you want to move things quickly and if you have the structures in place-for example, for a humanitarian office-that is something that you probably can do well. It is a clear objective: it is to get in there quickly and do the things that need to be done in an emergency. The issues come when you have these four big, different, widespread programmes, where the objectives are very difficult to discern. Therefore, you lose accountability and it is unclear what the Commission is trying to achieve. When there are specific targeted areas where it can do a job, that is an area where the UK would probably want to take part. Also, for example in countries where the UK does not play a role, that is an area where the UK would want to contribute to an EU fund that did that job for it. Again, it is coming back to this voluntary approach, where you are more able to opt in or take a pickandchoose approach, whereby there is more accountability and greater focus on what you are trying to achieve with the money.
Q61Chris White: Simon, there is a lot of logic about what you say, but do we not see a conflict when our priorities do not match the EU’s priorities? If there is a crisis in a country that we have a traditional historic relationship with, that may not match others’ priorities.
Simon Maxwell: The general issue is that, even after they have cut the 19 countries from the DCI, there will be a disproportionate amount of money spent by Brussels in middleincome countries. I have a list of how much aid is contributed per capita to different countries. Some of the Caribbean countries, for example, many of which are middleincome-all of them are probably middleincome-are receiving over $100 per capita per year. That reflects the fact that small countries often have high levels per capita, because they are small. But Turkey receives €3 a head per year compared to €2 for Ethiopia and only €0.75 for Pakistan.
It is true that every time we send £1 from London to Brussels, as Mr Bayley said in the previous session, we are taking money from poor countries and transferring it to middleincome countries. Is that a solvable problem in an EU context? Would we have the same volume of aid available to us if we were not spending it in a range of places? Do we want UK money to be used to help stabilise the neighbourhood and the Mediterranean, including the North African countries? If we were to provide money to any of those countries, it would qualify as aid because they are on the DAC list. I think probably we want to try to maximise the impact of DFID money on the poor in lowincome countries, but recognise that, through the EU, we also need to support the neighbourhood and the Mediterranean.
Q62Chris White: Thank you. The last part of my question would be: how do you see relationships developing with the emerging middleincome countries?
Simon Maxwell: DFID has shown the way on this in its new policy on India, which is to say that there are residual poverty problems that we can help with in the poorest states in India. In addition, there will be two new thrusts of British policy. The first is to work more with the private sector on publicprivate partnerships. The other is to engage with those countries on solving problems of global public goods, including climate change. Personally, I think it is quite difficult to make a case for largescale aid to middleincome countries, even if they have a lot of poor people in them. In the end, aid is about money. Of course, it carries lots of other things with it, like technical expertise, but if countries have resources, including large foreign exchange resources,-and India has over $250 billion-worth of foreign exchange-it is hard to see why we should be taxing British people in order to add to those resources.
Chair: I just remind colleagues we have a debate in Westminster Hall on Thursday on our report on India-a 90minute debate.
Q63Mr McCann: I do not intend to go off on a complete tangent but, given that there is so much weight placed on the MDGs and the numerical values within those MDGs, and given that countries like India have got such a vast population-1.2 billion people-if we do not tackle those areas, we are not going to be able to effect the change we want through the MDGs. Do we need then to change the measurement by which we want to calculate how well our aid works?
Simon Maxwell: The key word in that question is "we". Who are we? The Indian Government should be taking the reduction of poverty in India extremely seriously, as they do, but perhaps not seriously enough. There are lots of ways in which we can support that. For example, I would like to see much more twinning of NGOs, or linking towns and universities, generally engaging with civil society in India, in a reciprocal partnership around rights, access to services and spending on poverty reduction. It would be fascinating to have Indian NGOs working in the UK in the same way that we work in India, for example. Whether the logic requires that we then provide some hundreds of millions of pounds to add to India’s own resources is essentially an argument about what you could do with that additional money that the Indians could not do themselves. If they have tax revenues and they have foreign exchange reserves, at least the need for our money declines over time.
Q64Hugh Bayley: This is a question to Stephen. Do you think that budget support, if properly managed, can be a useful tool for development? Will you say a little bit about your objections to the EC providing budget support?
Stephen Booth: The jury is out. I am not an expert on aid, per se, but in terms of what we have looked at, where we looked at budget support in the most detail was in the North African region, where the EC ended up giving quite large amounts of budget support to regimes that are now no longer with us. There were obvious problems with human rights and so on. There was a lack of conditionality in terms of the budgets being given directly to Governments that really were not observing-I think the Commission itself acknowledged that it was not just the EU; it was other member states as well, and bilateral programmes. I think we should acknowledge that this probably was not appropriate, given the types of regimes we were dealing with.
The Agenda for Change and the new document on budget support have already talked about removing any kind of global target for budget support, which seemed implicit before. They were trying to aim for 50%, but they seem to have dropped that, which I think is a positive thing. They have also opened up the opportunity of diverting budget support away from Governments if they think that they are not fulfilling the conditions, and then transferring that towards more projectbased aid, looking at civil society more and trying to go from the bottom up. I think that is again a positive step forward.
Simon Maxwell: The EC spent 26% of its total aid on budget support in 2010. There are two reasons why one might want to do that. The first is you save a lot of money on admin costs by spending on budget support. It costs about a third as much to deliver budget support as it does project aid. Secondly, and more importantly from a development point of view, budget support empowers local governments; it supports their political process in setting budget priorities, and strengthens institutions in the recipient country. There is a good substantive reason why budget support has been very popular.
Of course, budget support is not appropriate everywhere. For the more fragile states, do not have the institutions. Where there are serious problems of corruption or diversion of funds, budget support is less attractive. Now, what the Commission has done, in its Agenda for Change document, is to emphasise the contractual nature of budget support, in which budget support will be provided, for the reasons I have given, but on the condition that it is well used, accountable and transparent. The Commission has talked quite a bit about governance conditionality, which is a very controversial topic you might want to come back to. An interesting point about the EDF is that it contains much stronger provisions for dealing with mutual accountability between donor and recipient than the budget instruments. That is another reason for supporting the EDF.
Q65Mr Gyimah: A question to you, Simon and Siân. You have partially answered my question, which is on the usefulness of the proposal to put budget support into a political contract. You seem to be suggesting that is particularly useful. The question I therefore have is: how do you actually enforce these contracts? If you cannot enforce them, how meaningful are they?
Siân Herbert: In my submission, I urge caution towards the use of conditionality in respect of political governance issues, precisely for the reasons you give: it can be quite difficult to implement it, to enforce it. At what stage do you cut the funds when people are not meeting sufficient requirements? Also, a key factor is whether or not conditionality is successful when there is no support for that within civil society, within the governance structures, of a country. I would urge caution. ODI has a project looking at budget support. Research from an ODI meeting series, involving lots of people involved in budget support, showed that the more conditions that were put on budget support, the lower the effectiveness of the actual budget support.
Simon Maxwell: DFID has a vocabulary for dealing with this kind of problem, which is that they talk about "direction of travel". There are obviously egregious human rights problems-diversion of money to buy presidential jets-where you really cannot stand by; it is an indefensible use of aid money to be associated with decisions like that. In lots of cases, you are dealing in developing countries with weak institutions, relatively high levels of corruption and often serious problems with human rights in new and fragile democracies. Rather than having a blackandwhite on/off switch with budget support, DFID’s approach has been to try to engage with countries and help them improve the quality of governance, institutions and accountability, trying to make balanced judgments about what is the most useful form of aid in different circumstances.
Q66Chair: Has any comparison been made of the programme in Ethiopia, the Protection of Basic Services, which was developed as an alternative to budget support after political issues blew up? That is still, I understand, the mechanism, as opposed to direct budgetary support. Is that something in between? My main point is: has any evaluation been done of that?
Q67Simon Maxwell: As you know, the Ethiopia programme was designed to take money away from central Government and route it through local government. I have not looked at that one specifically, but you had an interesting case when you looked at Zimbabwe in your assessment of the reports by the Independent Commission for Aid Impact. There it was quite clear that the strategy was to take money away from the Ministry of Health in Harare and route it back to local health centres through NGOs. As I remember the report, it seemed to think that was a reasonably effective strategy. I remember that you rather thought so too, when you crossexamined Graham Ward.
Chair: Perhaps also your caution on conditionality. We used a double negative in our last report, just to correct some of the press reports. What we said was-it was not about budget support generally-our aid relationship with donor countries, or recipient countries, I should say, should not be unconditional. It is not quite the same thing as saying it should be conditional, but there should be a flash that says, "If you go about abusing human rights, locking up the opposition, denying freedom of press, there will come a point when we may have to review what we are doing." I do not think that is quite the same thing as saying, "Before we start the programme, you will have to meet these criteria." I think we got that across, but not in all the headlines.
Q68Jeremy Lefroy: Is there an argument made within the EU that the way it is done at the moment, putting money through the main budget, which is then used on development-even if you have some problems with OECD definitions-is a way of forcing some of the more recalcitrant countries to contribute some money to ODA?
Simon Maxwell: That is a testable proposition, I guess, though it is quite difficult to know what the counter-factual would be. Having worked a little bit in the EU12, the new member states, my guess is that your statement is correct: that there would be lower aid programmes if there were not a commitment through the EU, including last year, for the first time, a contribution to the EDF. Whether or not the same argument would hold for the larger member states or the more traditional member states, I am not so sure. It is a good question to ask them. Would it work for the UK? The UK has a commitment to 0.7%, and we are making allocation decisions between windows. I suspect the same is true for most of the big donors-France, Germany, Scandinavia and so on.
Q69Jeremy Lefroy: It seems it would apply more to, as you say, the new countries within the EC or perhaps some of the countries such as Italy, which are not anywhere near meeting the 0.56%, let alone the 0.7%.
Simon Maxwell: That is true. The total ODA from all the new member states is only around €1 billion, but it is not very substantial.
Q70Jeremy Lefroy: That is very substantially through the European Commission. They do very little bilaterally.
Simon Maxwell: About three-quarters.
Q71Jeremy Lefroy: Is there an argument for, if it were possible, the UK to shift money to the EDF from the general budget? Clearly that is, to some extent, a hypothetical question, but it is certainly something that we would like to examine as a proposition-to say that we would like to see far more go through the EDF, as opposed to the general budget.
Simon Maxwell: The EDF is not perfect, because there are plenty of middleincome countries, including all the Caribbean countries I mentioned, which are receiving money from the EDF. In principle, it seems surprising to increase the DCI by 19% and the EDF by only 13%, noting that all these numbers are so far only Commission proposals. What actually happens in the budget outturn remains to be seen. It is also a bit odd, I think, to commit a budget seven years ahead, when we do not know what is going to happen to overall aid volumes.
What we saw in the current financial period, 200713, was that all these numbers were set in 2005, under the British presidency, and then aid increased and the EU market share fell from close to 20% to something like 18% and drifting downwards. There are some member states that provide less than 10% of their aid through Brussels-the Swedes and the Danes, for example. There is an argument to be made for having a significant market share in the hands of the EU, so that it can be a serious player in international negotiations, but if those numbers are fixed and aid increases, I think Stephen is right to say that there should be additional voluntary mechanisms available that would enable countries to route more money through Brussels if their aid programme is increasing and they are restricted, through the EDF and the other budget instruments, as to what they can provide.
Q72Jeremy Lefroy: Are you implying that some countries see even the EDF as a bit restrictive and would prefer to see yet another instrument that was perhaps open to other parts of the world? The EDF is basically the Cotonou Convention countries.
Simon Maxwell: Some years ago, I proposed that there should be a voluntary MDG fund, which would enable countries to make an additional contribution, over and above the budget and the EDF.
Q73Jeremy Lefroy: How voluntary is the EDF’s voluntary contribution?
Simon Maxwell: It works to a key as the EU budget, and will work more closely to it in the forthcoming period. It is as voluntary and as consensual as the EU budget as a whole.
Q74Jeremy Lefroy: A country such as Britain would be able to say, "Actually, this year or this period, we are not going to contribute to the EDF. We are going to contribute to the main budget." I am not suggesting we do, but it would, in theory, be possible.
Simon Maxwell: No. All EU Member States are obliged to contribute to the EDF. I cannot answer that question. I suppose in principle it would be possible for a country not to contribute to the EDF.
Q75Jeremy Lefroy: The word "voluntary" seems to have been rather misused then, if it is not actually voluntary.
Simon Maxwell: Both the budget and the EDF are agreed funding windows. In that sense, they are both as voluntary as each other.
Stephen Booth: I would like to comment on that. I think I disagree with that fundamentally. We may have to look a little bit more at the EDF and how voluntary that is, but the difference is it is a purposebuilt fund for aid, so you know what you are contributing to. Development within the EU budget is part of a huge negotiation, which involves the Common Agricultural Policy and regional spending, which are the two biggest parts of the budget. Development spending is quite a small part of the overall EU budget actually, and it becomes subject to horse trading with other countries and so on.
If you are concerned about getting the money for aid, it makes much more sense to have a purposebuilt fund for aid, and then you depoliticise it from all the other EU negotiations you have. You depoliticise it from the UK’s membership of the EU. Given the current political climate, if you are in favour of aid spending, once you bundle that with the UK’s relationship with the EU and the EU budget, you risk being on the wrong side of the political debate on both sides.
If you want a commitment to aid spending, why not have a dedicated fund to which you contribute and you understand what the money is for? You also basically extricate it from all the discussions about how much money we spend on French farmers and money that is spent within the EU on the poorer member states. I personally think, if you are in favour of aid spending, surely it makes sense to distance yourself from the general political discussions about the EU budget. It is wrong to say the EU budget contribution is voluntary, because it is not voluntary. If we do not decide an EU budget for next time around, they will keep spending the same money they are spending now, or we leave the EU. I do not think it is voluntary.
Q76Chair: Are you envisaging something like the World Bank division between the IFC and the IDA? Maybe the EU should set itself different contexts. What we have to evaluate, too, is the extent to which we put money into the EU or the World Bank. We might want to adjust the balance.
Q77Stephen Booth: What we have to really look at is that obviously this is British taxpayers’ money. Where is it best spent? There is an argument that the EU does have a comparative advantage in some areas, preaccession being one of them and possibly the neighbourhood. For preaccession, it makes sense to have it within the EU budget, because it is something that is very clearly about being part of the EU. That makes logical sense. On the Neighbourhood policy, I think the EU has not done a great job there, but maybe other member states have not either. In other areas, you can have an EU fund but why not have it voluntary? Why tie it to everything else as being part of the EU? It can be a separate issue, I think.
Q78Simon Maxwell: The logic of your position would be to come back to another committee next week and argue exactly the same for the CAP, for structural funds and so on.
Q79Stephen Booth: Precisely, and we are in the process of doing that in some of our other policy areas. The EU budget is all about making the best value for taxpayers’ money and the objectives you want out of it. As DFID has already said, the money that goes through the EU budget is less value for money than the money that goes through the EDF, so why not try to make an arrangement where we can be clear about what the objectives are, and fund it when we think it is achieving them, rather than the situation we are in now? We are basically handing money to the EU budget and we know we are not happy with it, but have little choice in doing it. That seems to me an unsatisfactory situation if you are a UK taxpayer or if you are representing the UK taxpayer.
Q80Jeremy Lefroy: I very much take that on board, and I believe the EDF does fulfil an extremely valuable role in this case, but what I am trying to get at is, in terms of contributions to the EDF, as opposed to the main budget contributions, how are they determined? Is it the case that, as with the Global Fund, countries just sit around the table in the next couple of years, and say, "Right, we are going to contribute this much, and it is irrespective of the proportion of our contribution to the main budget"? Does everybody contribute in proportion? No, they cannot contribute in proportion to the main budget, because some people are recipients and some people are donors, in effect, to the main budget. So how does it work? How does the EDF funding actually work?
Stephen Booth: I will have to get back to you with more detail on the specifics of the EDF.
Simon Maxwell: Factually, I can answer that question, I think, but your specialist adviser may have a better answer in due course. First of all, the European Union as a whole makes a commitment to the replenishment of the EDF. Last time around, that was based on agreed contributions by the member states. This time the proposal is that the EDF contribution key be brought in line with the EU budget key. I guess that is a proposal that will have to be agreed. If it is agreed, the second question will be: how big should the EDF be overall? Once the size of the EDF is agreed and the key is agreed, individual member states’ contributions can be read off arithmetically. It is not like the replenishment of, say, the Global Fund or the IDA, where countries make unprompted voluntary contributions that are independent of each other.
Q81Jeremy Lefroy: Thank you. I see from the information just given to me that the proposed contribution for the UK is 14.33% in the next round, and then there is a percentage for every single member state.
Chair: That is a proposed voluntary contribution.
Jeremy Lefroy: Yes, exactly. This is where I have a slight problem with the word "voluntary", because it seems to be slightly stronger than voluntary. Finally, does anybody have a view on why the Commissioner has in fact-I welcome this-proposed to keep the EDF separate from the budget, and not go on with the budgetisation, which we of course opposed?
Simon Maxwell: There are two aspects to that. One is I think they are keen to keep as much as they can off-budget, simply to make the budget look manageable politically at a time of fiscal stringency. The other is that, although there are some disadvantages to the EDF being outside the budget, particularly with regard to parliamentary accountability, there are some strong benefits to being so closely associated with the political procedures of the Cotonou Agreement, which has a joint Council of Ministers, a joint Parliamentary Assembly, arbitration procedures and a trafficlight system, which is highly relevant to the conditionality discussion we were having earlier. There is a case, actually, for EDFising the budget components of aid, rather than budgetising the EDF, for that reason.
Stephen Booth: As I understand it, some member states that are less keen on spending a large amount of money on aid would be quite happy to see it budgetised, and therefore aggregate spending coming down that way; they would basically be saying, "We are spending more via the EU budget on aid, but we are actually spending less on aid in total," as the EDF no longer exists.
Siân Herbert: A last point on that: if it were to be budgetised, different countries would have to contribute different amounts. If we take the new proposed EDF contribution key as an indication, it is proposed that some countries will pay larger shares and some smaller than in the current round With the new proposed EDF contribution key, the EU 12 will pay a larger share. DFID will see a slight decrease in its contribution share, and some other countries, I think France, will see slight decreases in their contribution shares.
Q82Hugh Bayley: Siân, I am a little bit confused. Your name appears on the Open Europe submission and yet you are speaking for ODI. Does that mean you have moved from one to the other?
Siân Herbert: I have, yes. In September, I changed jobs. I used to be a researcher at Open Europe, and I coauthored the report with Stephen last year.
Q83Hugh Bayley: Thank you. Where could policy coherence for development be improved within the EC?
Siân Herbert: Many areas. Policy coherence for development is a massive series of objectives, and it involves agriculture, trade, research and taxation. It touches on many aspects. There is a benefit with the ECmanaged aid through the main budget because, of course, when it does come to negotiating the budget, there is very much an idea that there should be PCD between the areas. We are seeing now that perhaps CAP funding will lose some funds; the idea is that would go towards development funding. There is mainstreaming of climate issues, in terms of agriculture, into development projects, which could be a key achievement. I think the Common Agricultural Policy, is one of the main obstacles to a lot of development objectives.
Simon Maxwell: We learned a lot from the creation of DFID in 1997, which was intended to create a Development Ministry rather than an Aid Ministry, with some notable successes. DFID was highly influential on the UK’s trade agenda, for example. It has been very influential on climate. Andrew Mitchell is a member of the National Security Council. The logic of development in the 21st century should not just be about aid; it should be more general. Anything that we can do to position the EU machinery in that direction is desirable. We think that Agenda for Change was too focused on aid and not focused enough on these wider issues, and so we would encourage Commissioner Piebalgs to take a greater role on trade, migration, fisheries, agriculture and climate change.
Stephen Booth: I would echo that. As Simon has mentioned a few times, the perceived advantage of giving money to the EU is that it has more weight in negotiations on climate change and security policy, if you want to include that, and in terms of policy coherence or migration. The problem is the EU does not have a coherent position on a lot of these issues, climate change aside, where it has led the way in certain areas. On foreign policy, the EU has a very hard time in coming to a common position on certain countries, and there is a clear lack of any kind of migration policy. These are laudable aims, but I question whether they are going to be achievable, because the EU has struggled so badly in coming to a coherent position in many of these other areas. It is obviously the right thing to aim for. I just think it is difficult for the EU to promise it, because it has a bad track record of delivering so far.
Q84Hugh Bayley: When we went to southern Sudan, we went to the DFID office, which was contained within an EU office. I had imagined that they had just decided to build a building together and colocate, but that was not the case; there was a shared EU approach to development assistance over the last five years. That appeared to be coming to an end. Was it a model that worked well and is it a model that should be replicated elsewhere?
Simon Maxwell: Across the development community, and especially in the leadup to and following Busan, countries are very highly focused on harmonisation, alignment and collective action in support of Governmentled development programmes. As you think about that, it leads you inevitably in the direction of multilateral aid because, if you have one programme, you can all support it. What has happened in many countries is that the transaction costs of donor coordination have absolutely exploded. I understand that in Mozambique, for example, there are 72 sector working groups under the ‘G19’ arrangements underpinning multi-donor budget support.
The Commission’s approach to this problem has been to talk about joint programming and a code of conduct, which will try to limit the range of different activities that donors are carrying out. DFID and other big bilaterals are nervous that the Commission does not have the capacity to lead and do not necessarily want to be coordinated in that way. Obviously, having a single results framework led by the country is the way to go, and all donors should come in behind that.
Q85Hugh Bayley: To pick up on something that Stephen was saying earlier, he suggested that it was a clumsy arrangement to have EU funds allocated to a particular bilateral donor to administer and implement a programme. It seems to me it might actually make sense, if the Dutch are doing a good maternal and child health programme, to say, "You will be the implementer." Then you would gather in 100% of EU funding to the most effective programme whereas, if you just left it to the Dutch, they would contribute-I don’t know-5% of that amount. Is that something that, in contrast to Stephen’s advice, you would like to see the EU doing more of-identifying a lead performer?
Simon Maxwell: I certainly agree with the principle of your argument. There are some smaller EU donors that deliberately set out to work through a delegated cooperation mechanism. For example, Cyprus has a delegated arrangement with Ireland for health work in southern Africa, because Cyprus wanted to do that but did not have the capacity that Ireland does. That seems very sensible to me.
Q86Hugh Bayley: Is there anything else that the UK Government should do differently to promote joint working with other EU Member States?
Simon Maxwell: DFID rightly says that the Busan principle, the aid effectiveness principle, is that all donors should be working in support of governmentled programmes, and that there is little sense in having one 27+1 set of arrangements, and then all the other donors having to have a separate set of arrangements of their own. If we can mobilise all donors together, including the EU, that is sensible.
Chair: Thank you very much indeed. I think it has been an interesting session. We are meeting in Brussels the week after next, so if you have any ideas as to questions we should have asked, over and above what we have discussed, we would be very happy to have your suggestions. You, of course, can then put your other hat on, Simon. I am talking about the other two witnesses. Thank you very much indeed.