Public Accounts - Minutes of EvidenceHC 660

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Oral Evidence

Taken before the Committee of Public Accounts

on Wednesday 24 October 2012

Members present:

Margaret Hodge (Chair)

Mr Richard Bacon

Jackie Doyle-Price

Austin Mitchell

Nick Smith

________________

Amyas Morse, Comptroller and Auditor General, National Audit Office, Gabrielle Cohen, Assistant Auditor General, NAO, Phil Gibby, Director, NAO, and Marius Gallaher, Alternate Treasury Officer of Accounts, were in attendance.

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL

The multilateral aid review (HC 594)

Examination of Witnesses

Witnesses: Owen Barder, Senior Fellow and Director for Europe, Center for Global Development, and Alison Evans, Director, Overseas Development Institute, gave evidence.

Q1 Chair: Welcome. Sorry we are running a bit late. We have a vote at 4pm, which will be a natural break. We are very grateful to you both for coming to give evidence, particularly Alison, because I gather that you flew in from India last night or this morning.

Alison Evans: Actually, it was over the weekend.

Q2 Chair: Over the weekend; so you have had a little time to sort things.

The purpose of this part of our evidence session is to talk to stakeholders and get their perspective on the work that the NAO has done, so that we can be rather more intelligent in our questioning of officials when we come to it and bring in your experience of it all. Feel free to tell us anything-we are not trying to catch anybody out-that you think we should consider in consideration of the Report. I preface this by saying that this is one of the most positive Reports this Committee has had in quite some time. It seems as if DFID is moving in the right direction in how it has done your review. That is how we read it. I am interested in your perspective on whether this review takes us in the right direction and where you think they should take it from here, or how you read it. Who wishes to start?

Alison Evans: Thank you very much, and thanks for the opportunity to speak to you. As you will hopefully know, I was an external peer reviewer of the multilateral aid review along with Professor Lawrence Haddad, the director of IDS, so I had the opportunity to see the multilateral aid review process really close up in a number of respects.

The first thing that I want to say is that many of the conclusions drawn out of the NAO Report chime very much with my understanding and experience of the MAR process; I felt I was reading something from the same reality, and that was very reassuring. The NAO Report is very clear and concise, it gives credit where it is due, and it points also to a number of-I won’t necessarily call them weaknesses-outstanding issues that certainly could be dealt with in subsequent iterations of the MAR. I am happy to elaborate quickly, as I realise that we do not have a lot of time.

Q3 Chair: Please do.

Alison Evans: The first point is that the MAR takes multilateral organisations very much on their own merits, and each is taken as a distinct organisation, rather than perhaps seeing multilaterals as part of a system. I think that, in many ways, that was the right pragmatic decision to take in a review of this nature, but it does leave a question hanging on the competencies of the system as a whole and what we, particularly as an international development community, are getting out from the multilateral aid system. I think that that question hung, like the elephant in the room, a little bit during the process, and the NAO Report rightly points to it as an issue that perhaps needs some consideration in subsequent rounds. At least, it needs to be discarded positively as a question that should be asked-the question of overlapping, duplicating mandates of multilateral organisations, for example; and the more fundamental question of what kind of decision process the UK Government are taking about how to further their development objectives thought the multilateral aid system, and how they look at that as a whole. Those are questions that, frankly, were not on the table during the review. I think they would have been hard to engage in alongside doing this very significant number of individual-

Q4 Chair: Could I just stop you, because I had not twigged that. I accept that the review looked at the issue organisation by organisation and didn’t look at the whole, but they surely looked at each organisation to see whether it was meeting DFID objectives?

Alison Evans: Indeed; they looked at the relevance question, which loomed very large in the overall criteria, but there was not a question of whether this particular development objective was better met multilaterally or bilaterally, for example.

Chair: Right, I get that.

Alison Evans: Or whether meeting it through one particular organisation makes sense over another multilateral organisation; it was very much taking things at face value. Now, as I say, those are very tough questions to ask because they involve a certain amount of counterfactual, but I still think it is something that remains. The NAO Report hints at that, and that is right.

Q5 Nick Smith: Has anyone else done that piece of work? It does sound very important.

Alison Evans: We don’t actually have a piece of work that involves the strong narrative around what we think the multilateral aid system should deliver for us as a bilateral, and therefore how we use it to deliver those objectives. I do not know of an agency that has done that piece. Obviously, we have metadata that ask questions about the overall system, including some of the work that the CGD has done through QuODA, but I do not know of an agency. Perhaps officials will know differently, but I certainly have not seen such a piece.

Q6 Chair: I might be interrupting you too much here, but my instinct-I am no great expert-is that, always, if you are trying to work through the plethora of EU and UN-type agencies, you waste one heck of a lot of a money on the way in bureaucracy, and less gets to the front line.

I see that you are surprised by that. Okay, we will come back a bit because I am told that that is not right. But instinctively, with all the work that I have done at the multinational organisation level, I know that money is difficult to follow because it always seeps out into the system. I asked the question before the NAO of how much of this went on admin, and they could not answer it.

Alison Evans: But I actually think that the multilateral aid review gives a considerable amount of comfort, in the sense that we are now closing down on the flow of funds. It is looking at cost control and financial management in a way that, perhaps, agencies were not so focused on in the past. I think that DFID, in a sense, was a trailblazer in actually coming to the point where it asks those questions systematically of these multilateral organisations on a fairly level playing field. There are reasons to believe that, at the peripheries of the system, that may be the case, but I would not accept your point as a fundamental challenge.

Owen Barder: I think that DFID deserves a lot of credit for not only conducting this review, but publishing the details of it in a way that has made the rest of the international system sit up and take notice. We have now seen other countries respond to this. I have just flown in from Australia, where they have conducted their own review, and we have seen reviews in the Netherlands and Sweden. They are all pursuing exactly the same idea, which is that we should be much more systematic about looking at multilaterals and deciding which are the most effective, and how we should channel it.

I think DFID has really changed the game-I can say that because I was not involved with the multilateral aid review, so I am claiming no credit for it-and has improved the way we think about it. I also think we should not start from the presumption that multilateral aid is less effective than bilateral aid-that is a common presumption in a lot of capitals and among a lot of parliamentarians. However, when you look at value for money, there are theoretical reasons for thinking that multilaterals would be more effective and, in practice, such data as we have tend to support that idea. I can tell you a bit about that, but in the index that the Center for Global Development produces on the quality of aid, the multilateral agencies-

Q7 Mr Bacon: Sorry, can you repeat that? The index that the Center for Global Development produces-

Owen Barder: We produce something called the Quality of Aid Index, which has four dimensions, one of which is efficiency, which closely aligns to the value-for-money measure. The bilateral agencies we look at are all in the top half of the index, and there are reasons for that. The multilaterals are less likely to be captured by special interests. For example, the untying of aid is much easier through the multilateral system.

Q8 Mr Bacon: When you say the top half of the index, do you mean that they have a higher number, and that is bad?

Owen Barder: No, that is good.

Q9 Mr Bacon: You said bilaterals. You meant multilaterals.

Owen Barder: I’m sorry, I mis-spoke. The multilaterals are all in the top half of the index.

Q10 Chair: And the bilaterals aren’t.

Owen Barder: And the bilaterals are not all in the top half, although DFID is extremely impressive in our index, as in all these kinds of index.

Q11 Chair: And why is that? What is the explanation?

Owen Barder: There is a bunch of reasons. One is that there are returns to scale. One is that there are returns to specialisation, and another is that you are less likely to have tied aid-a lot of bilateral donors are forced to spend money inefficiently through their own national companies, whereas through the multilateral system there is much less bias in that direction.

Multilaterals can do things that bilaterals cannot. They are regarded as less politically sensitive than sovereign Governments getting involved. They are able to deal with global public goods in a way that the bilateral system often cannot. There are often big spillover effects from having a lot of bilateral agencies. A lot of pollution-the multiplicity of different agencies-is greatly reduced by having money go through the multilateral system. I think that we should not start from the popular assumption that multilateral agencies are less effective than bilateral agencies. We should start from the question of where we get the best value for money.

What is interesting about the process that DFID has followed this time, with the multilateral aid review and the bilateral aid review, is that really for the first time it has made that trade-off explicit. In the past, there was always a separate decision about how much we are going to spend bilaterally and how much we are going to spend multilaterally. This year, for the first time, it has taken those decisions together and put the money wherever it thinks it is going to get the best value for money. I think that that is something the Committee should welcome.

Q12 Chair: Okay. Where do we go from here with this review? Where would you go?

Alison Evans: One of the issues raised by the NAO Report was about encouraging more joint assessments across the bilateral community and, as is now taking place in Australia, the Netherlands and elsewhere, using the DFID initiative to begin to encourage bilaterals to share this type of assessment, not only to crowd in the positives of this kind of work, but also to put reasonable pressure and clarify the pressure that bilaterals want to place on multilaterals for further reform. I don’t disagree with that, but I don’t think you should underestimate just how hard it is either. A number of exercises have been tried in prior eras to encourage bilaterals to get together to come up with shared assessments of multilaterals which, in my view, have fallen short somewhat-MOPAN being a particular example.

Q13 Nick Smith: Sorry, what is that?

Alison Evans: The Multilateral Organisation Performance Assessment Network, which is 16 bilaterals getting together to agree on a framework for assessing multilaterals case by case. It is great in principle, but really has not delivered any kind of change that is meaningful. It opens up a way for a conversation, but it really has not motivated them. One of the missing pieces, quite frankly, is the link to funding. What this review does, very clearly, is to bring together the arguments-

Q14 Mr Bacon: Sorry, you mean the lack of a link to funding?

Alison Evans: Yes, the lack of a link to funding in MOPAN. The MAR has clearly made that link. Although we know that that link cannot be treated entirely mechanically, nevertheless it has provided a very strong incentive effect. So, in terms of where we go, there is a case for looking for opportunities to do more of these types of assessments in a joint framework with other bilaterals, but we should recognise that there are going to be some sovereign decisions about funding that, quite frankly, you would not be able to share jointly across bilaterals.

Q15 Chair: So where do we go from here?

Owen Barder: I agree with that, but I would add one thing: all these exercises-the one that we did at the Center for Global Development, the Multilateral Aid Review and the ones in other countries-are essentially using proxies for value for money. We do not have good enough data yet on how much different kinds of activities cost when performed in different organisations. I am not saying that we should use that information mechanically and algorithmically to allocate funding, but we should have it available to make informed decisions.

It is a shortcoming of the system that all of us who are the shareholders in these organisations or member states have not pushed harder to have systematic evidence about outputs and outcomes publicly available to enable us to do a proper value-for-money assessment. DFID has led the way in pushing for that, and I think that is very welcome. One thing that is striking about these different reviews is that because they are all, in a sense, circumstantial evidence about value for money, they do not all line up with each other. There are some common themes that emerge from them, but the key piece of information that you want-the unit cost of doing something through this organisation or that organisation-is not really available. One of the things that the NAO Report points to is that we should push harder to get consistent information available much more systematically and openly across organisations so that we can make more informed decisions.

Q16 Chair: There is nothing to stop multilateral organisations setting it and collecting it, is there? You can see that a small, on-the-ground delivery organisation might have some difficulties, and you can see the difficulties over qualitative and quantitative data and all that sort of stuff, but I don’t understand why it has been allowed to go on like this, without a firm database.

Alison Evans: We all agree on that.

Owen Barder: We agree there.

Q17 Austin Mitchell: Some of the worst organisations-those rated just adequate or poor-are big name organisations that are at the forefront of major developments, such as the World Health Organisation, the Food and Agriculture Organisation and the International Labour Organisation, whereas the ones at the top, which are efficient and so on and so forth, are ones I have never heard of. What does this mean: that the bigger an organisation is, the worse it is; or that the more dedicated it is to a specific and narrow focus, the better it is? What does it mean?

Alison Evans: I think that your hypothesis-that some of the organisations that came out towards the top of the scoring are more specialised and able to tell a better story on delivering results-is a fair one. There are a number of organisations up there in the top band that absolutely fit with your hypothesis. GAVI, in particular, has a very particular supply chain and delivers a very particular product, and it can do so in a very targeted way. When you look at the criteria underpinning the multilateral aid review, those things are highly valued, and it is able to demonstrate that. In fact, that is borne out by broad experience-it is actually a highly effective organisation.

Some of the organisations further down the rankings-you mentioned the WHO, and the Food and Agriculture Organisation-are definitely much more complex. They have multiple mandates, and in the case of those two organisations, at least, they also have what is called a standard-setting or norm-setting function within the international system. For the WHO, that is in relation to certain protocols around the health domain, and for the FAO it is around agricultural standards.

I think it was well recognised during the multilateral aid review that some features of those particular organisations-their norm-setting functions-were not as valued in the criteria as the straight down the line efficiency and effectiveness criteria.

Q18 Austin Mitchell: Why is that?

Alison Evans: It was just more difficult.

Q19 Austin Mitchell: It was the nature of the criteria

Alison Evans: Yes. The criteria did not capture them to the same degree. They are a bit less tangible and it is a bit harder to demonstrate clear results, and, actually, the institutions themselves find it more difficult to tell a very clear results story. I think that that is a weakness on their part, I have to say, but it was one that somehow got amplified during the review. The team did try to take that into account. They made a number of adjustments to the scores during the moderation process. There are other features of those organisations that are a challenge-poor cost control, lack of clear strategies around improving human resource management and so forth-but, nevertheless, the issue of the norm-setting agencies hung over the whole review, and I know that it is now being treated very seriously for the next stage, which is the update of the MAR for 2013.

Owen Barder: I agree with all that. We should add that, in terms of where most of the money goes-through the World Bank and the European Community-these are the high-performing multilaterals. You have a long tail of much smaller organisations with norm-setting functions, as Alison says. However, when thinking about value for money for the British taxpayer, although they are performing an important role in the international system, they are not soaking up a lot of our multilateral aid.

Q20 Austin Mitchell: For some organisations it is more or less inevitable really. Do you think the Department has the right balance between funding multinational organisations and direct aid? To some extent, just chucking money at multinational organisations is a lazy person’s form of aid, and it is certainly more difficult to justify when we face hostility in our constituencies. People like to see gratitude and a direct effect for Britain.

Alison Evans: I have to say that I support Owen’s opening statement on this. I really think that starting from the standpoint that multilateral aid is somehow less effective than bilateral aid simply does not stand up to scrutiny. I think that the multilateral aid review goes a long way towards helping us to understand why that is not the case. Surely the question for a development Department such as DFID is: where can we best place our money to achieve our overarching near-term and long-term objectives? I think the fact that the bilateral and multilateral aid reviews are being brought closer together is an important step forward.

Q21 Mr Bacon: I have one question about MOPAN. You said earlier that it was inadequate in some ways, most obviously because of the failure to link its results with funding, which is a fairly obvious flaw that presumably can be corrected quite easily. Were there other flaws in the MOPAN methodology that made it an inadequate tool for measuring in itself, regardless of the failure to link it with funding?

Alison Evans: My own view is that it was over-complex and found it quite difficult to tell a really strong narrative about multilateral performance over time. Another thing is that it was so detailed that it would take a very long time to do the reviews, and it wouldn’t do another for a period of three to five years. There was not enough data to be able to build up a strong picture of change, and I do not think that it zeroed in sufficiently on dimensions of reform. There are a whole number of weaknesses but, in the end, such networks were established to be part of a conversation that we or bilaterals would have with multilaterals to encourage them to perform better. Multilaterals more or less ignore it. They say, more or less, "Well, you can go ahead and do it, but we aren’t going to change our behaviour, because this really doesn’t fundamentally change the way you relate to us."

Q22 Mr Bacon: You are saying that if you hold the purse strings in front of them and then suddenly take them away, that does change their behaviour?

Alison Evans: I think it does change the conversation drastically.

Mr Bacon: Surprise, surprise.

Alison Evans: Undoubtedly. I personally do not think you could retrofit MOPAN now, suddenly to be linked to funding. I think that might be slightly dangerous.

Q23 Mr Bacon: No, no. But how near are we to having a more sensible methodology that is both, as it were, in the same breath, less detailed-in the way you described it as being too detailed-and also richer so that it informs decisions more effectively?

Alison Evans: I think the Australian iteration of the UK multilateral aid review was a very good development. I think we have data now from the Netherlands process which has been going on for a bit longer. Together they actually increasingly converge around a methodology, which multilateral organisations recognise themselves as important, but which provides a really quite strong link back into decisions about funding. One of the challenges is not just is the methodology there, but is the evidence there? I think this is another flank on which more work needs to be done. Owen pointed to the absence of clear cost data. That is right. But many organisations are still struggling to articulate their impact in a way that can be easily understood and compared across the piece. There is a lot of work to be done there. The multilateral aid review took into account all kinds of different forms of evidence and was very balanced in the way that it tried to deal with them. It probably was a little bit too even-handed in places-willing to go with the benefit of the doubt. Over time I think it needs to be more demanding of these organisations in terms of the quality of evidence that they provide to support the review.

Q24 Nick Smith: I want to go back to figure 13 and these organisations in red at the bottom of the page, which are seen as poor performers. Ms Evans, you talked about the Department looking very seriously at core funding for the organisations in the food chain. I want to tease out what you meant by "more seriously", and how we are going to hold our funding gun to the head of these organisations and say, "Improve your act, or else."

Alison Evans: Sorry, but I did not get the first part of your question.

Nick Smith: Given the poor performance of these organisations in red at the bottom, how will the Department put its funding gun at their head and say, "Improve your performance or else"? What is the best way of really getting these organisations to pull up their socks?

Alison Evans: I think it is probably not holding a gun, quite frankly. There are a number of ways of doing this in my view. One is to gradually ratchet down any kind of core resources.

Q25 Chair: That is a gun.

Alison Evans: You call it a gun. I think there is a way of doing that whereby you don’t commit collateral damage to organisations that are actually very dependent on external funding. That is something that needs to be done predictably and carefully over time. A number of these organisations are very dependent on their bilateral contributions.

Q26 Chair: What is frustrating-I agree a little bit with what Nick said-is that you have done all this work. You have a massive review and you look at the impact of the work, and £8 million has changed its direction. A lot of it is tied up in European or UN commitments that we cannot get out of, so the Report tells us. We have done this brilliant bit of work. The Australians are doing a brilliant bit of work. The Netherlands has and it doesn’t change things.

Alison Evans: We need to think what the relevant time horizon is here. You cannot make decisions on an annual basis about where you put these resources. On a three or five-year basis, absolutely; it is over that time frame that we should be looking for the real substantive changes in my view. So by 2013 we should be beginning to see the wheat and chaff being separated more clearly. To take those decisions, based on what is essentially a one-shop review at this point, and of a drastic nature, would be a little reckless.

Q27 Chair: Owen, do you agree?

Owen Barder: I am a little more in favour of metaphorical guns perhaps than Alison. I used to go round saying that only one multilateral aid agency had ever closed-the Nordic Development Fund. I discovered today that that was resurrected at the last minute just as it was about to close. We now have about 230 multilateral aid organisations, about 90 of which work in global health. It seems to me implausible that the system can work effectively if we do not have some kind of exit process. As we introduce new organisations and fund the most successful ones, we need some mechanism for shutting down ineffective organisations.

I understand that that is difficult for the staff and organisations concerned, and we have to make sure that we do not lose key functions that some of these organisations perform. It seems to me, however, that having a group of organisations-like DFID, like Sweden and like Australia-that are being more systematic, thorough and transparent about assessing organisations should lead us, in the end, to making some tougher choices. You sense in the MAR that DFID really is signalling that that is what they intend. That has got a lot of organisations’ full attention, and rightly so.

Q28 Austin Mitchell: I am interested in international comparisons. How does the proportion of aid that we give to multilateral organisations compare with the proportion of aid given to them by big aid givers such as Sweden? Are we more inclined to use multilateral organisations, or less?

Owen Barder: More.

Alison Evans: I was going to say it is on the upper end.

Owen Barder: Roughly speaking we are giving between 45% and 50% of our aid as core funding to multilaterals. It is important to understand that of the rest that counts as bilateral aid-around 55% of our aid-at least half is also spent through multilateral organisations but is earmarked by us for particular projects, countries or purposes. So nearly 80%, or certainly more than 75%, of our aid is actually spent through multilateral aid organisations.1

Q29 Mr Bacon: Is the decision about how that is spent made in-country? Once a particular country knows what its budget is, does it then choose how to disburse that, in collaboration with fellow bilateral donors and in negotiation with various multilateral agencies on the ground in-country, when you have decided that that is your parcel for, say, Tanzania? Is that how it works?

Owen Barder: The core funding is provided to multilateral agencies and then the process for that organisation decides how that money is going to be spent.

Q30 Mr Bacon: I am talking about the other half that you mentioned.

Owen Barder: For the other half, that is decided by DFID staff and Ministers, working together to decide how best to use the resources they have for the bilateral aid programme. They are making choices about whether to manage projects directly or whether to contribute through the multilateral system in-country to contribute to shared goals there.

Q31 Chair: Give us your view, given that we do more through multilateral organisations. Is that good or bad?

Owen Barder: I think that we should be spending less through the multi-bi-this part that goes through the bilateral aid budget into the multilateral system-and we should put more of that money into the core funding of multilaterals.

Q32 Chair: Why?

Owen Barder: Because multilaterals are, on the whole, more effective than bilateral aid. We are in fact making choices to use the multilateral system faute de mieux, because there is not a political appetite here-

Q33 Mr Bacon: That was the purpose of my question. I was trying to understand whether the decision to use a multilateral delivery mechanism is made by the DFID people on the ground in-country, having taken the half that is bilateral and then taken a chunk of that-you describe what is effectively 30% of the total, which means that 80% ends up being spent that way-or is the decision taken before the money leaves London?

Owen Barder: No, it is taken based on what is the most effective use of that money. Each country office is making proposals through the bilateral aid review about how they can best use money in that country.

Q34 Mr Bacon: Yes, and it is not at all surprising that they might come to the conclusion that on such-and-such a programme it would be best if we co-operated with our partner bilateral donors and with such-and-such a multilateral agency to deliver it. But you are talking about taking that money away and giving it direct to one of the multilaterals at source, so to speak. That is what you are saying-increase the 45% to 50% that goes multilaterally upwards, ab initio.

Owen Barder: No, I am saying that we should do that if that is the most cost-effective choice, and my submission is that it very often will be. There are all kinds of political and institutional pressures to spend more money through the bilateral aid programme than through the multilateral programme, and that tends to depress the amount of money that goes through core funding of multilaterals. It is quite understandable why that should be, but that is better value for money.

Q35 Mr Bacon: You have already said it is more than half. So of the half that gets spent bilaterally, you said that about half of that-it is more than half, actually-which takes it up to 80%, ends up being spent multilaterally. Are you saying that that number is actually small and it should be still higher?

Owen Barder: No, I am saying that, of the money that we spend multilaterally, my hypothesis is that more of that would be better spent through core funding of multilaterals than via the bilateral system. Of the amount that we spend multilaterally, it would be better to spend that through the core budgets of multilaterals, rather than through multi-bi

Q36 Chair: Do you agree with that, Alison?

Alison Evans: I agree with the importance of emphasising the core budget, because that is the best possible way of allowing multilateral organisations to do what they do best. The problem with spending through the bilateral programmes is that every bilateral in a country is finding bits of multilateral programmes that they quite like adding funds to, and, even though it might be in pursuit of some shared goals, it actually leads to a potentially more fragmented use of funds. I would be inclined to say that core is better than this multi-bi system of countries. However, unlike Owen, I am not entirely sure that I would be looking to increase the percentage going through core. DFID is probably quite exposed. It needs to demonstrate that it can tell a really good value-for-money story in relation to that exposure to multilaterals, and that it can continue to apply reasonable pressure, but, at this point, I would not be looking for any reduction.

Q37 Mr Bacon: You are looking for greater exposure. Let us just be clear about the difference between you. You are looking for greater exposure and, to use Alison Evans’s phrase, you think that that should be upped further.

Owen Barder: Where I think we agree is that one of the-

Mr Bacon: No, I am asking you where you disagree. I just want to be clear on where you disagree. To use Alison Evans’s words, you are looking for greater exposure.

Owen Barder: No, I am looking for the greatest value for money, and my hypothesis is that if we took a fair judgment about where the highest value for money is, more aid than presently would flow through core multilateral funding. I am not starting from a view that there is a correct target to reach. I am starting from the view that if we took a rigorous and impartial view of where we get the best value for money, I suspect that we would end up putting more through the core multilateral projects than we currently are.

Q38 Chair: We have two minutes until we vote. Are there things you think we should be focusing on in our next session?

Owen Barder: One observation relevant to this discussion is that Britain is in an unusual position of having a single Department of state that is able to make choices about both the bilateral and multilateral aid budgets. In most other countries, it would be for the Treasury to decide what goes into the multilateral system. It is a huge strength of our system and one that we should cherish that DFID is in a position to make those trade-offs directly. For the first time now, they are doing that, and I think that is something that we should mark and note as being a real strength of our system and one that other countries rightly envy.

Chair: Alison?

Alison Evans: I suppose that my last point would really be about the reform agenda that flows out of the multilateral aid review, and focusing some of your attention on how credible you as a Committee feel that that reform agenda is and how well it is being monitored and followed up on. The point at which I certainly dipped out of this multilateral aid review was the point when it was a very nice report with some really good data and some good quality judgments. Ultimately, however, its use value is in its ability to get change. A key area of focus for this Committee is how credible you feel that the follow-up with multilateral organisations is going to be.

Q39 Mr Bacon: Yes. Do you think it is possible that it might be more credible with a few extra DFID people on the ground keeping an eye out and sniffing the air and seeing what is going on? Having spent a week in Sierra Leone earlier this year and having met some incredibly impressive DFID people, that would be my sense. I fear, however, that Mr Barder’s route would mean fewer people on the ground. It plainly has a cost, but it means less checking of what is going on, does it not?

Owen Barder: If I may say so, I would like to see more DFID staff working on improving the quality of multilateral aid. In order to release staff to do that, we would need to be managing a smaller bilateral aid programme. One of the advantages of shifting the balance towards the core funding of multilaterals would be that we could strengthen what I think is an extremely important role that DFID plays in the international system, which is really working with multilaterals to improve their effectiveness not just for the aid that they spend on our behalf, but also the aid they spend on everyone else’s behalf. You are absolutely right. Having people working as part of the system to improve its effectiveness is crucial. We could do more of that, were we to provide more of our aid multilaterally.

Chair: Thank you. That was really helpful, clear, and informative.

Sitting suspended for a Division in the House.

On resuming-

Examination of Witnesses

Witnesses: Mark Lowcock, Permanent Secretary, Department for International Development, Anthony Smith, Director, International Relations Division, DFID, and Liz Ditchburn, Director, Value for Money, DFID, gave evidence.

Q40 Chair: Welcome. It is the first time, I think, that we have seen Anthony Smith. As you heard me say, this is a very complimentary Report and we are very pleased that progress has been made. We are always told that we do not say it often enough, so I am saying it loud and clear: congratulations, because you are doing some very good work here. I hope that the content of our questions can be seen in that context.

I feel that it is a good review. You have heard some of the drawbacks and we will come to them. It appears, looking at it, that little has changed so far. You have stopped funding four organisations, which is worth about £8 million, but little else has changed from this Report. Can you talk us through how you intend to take forward and make real some of the findings that you uncovered?

Mark Lowcock: Thank you. I think that that is the key question. We have taken a little step forward, but there is a big journey ahead and that is what we are focused on. There are four or five things that we are doing. First, with each agency that we reviewed, we set out a reform strategy. We said that we would assess next year how they are doing on their reform strategy, and have a dialogue with them, and we will do another whole big exercise in 2015.

Secondly, as you heard, one problem is that most of these organisations have perhaps 150 members and one member on their own has limited influence. We have been trying to ally better with others to drive reform collectively. You heard about what is called the MOPAN, and one problem with it was that it was not linked to money for the agencies, but there were other problems, too. It was very selective. It was secretive and the results were not transparent. It was reduced to lowest common denominator, so the real issues were not exposed. With the multilateral aid review and the way others are taking it up, we have a much better dynamic of change.

Thirdly, we need to get people to have a much stronger focus on the costs of doing things, so that we can make direct comparisons. You raised the issue of administration costs and I can talk to you a bit more on the progress we have made on that if you would like me to, but there is also the cost of delivering specific outputs.

Fourthly and absolutely crucially, we have to link the money to the progress. Leaving organisations sends a big signal. Of course, the UK is unusual in leaving four of them. I asked my colleagues who else had ever left an organisation and the only example that we could find off the top of our heads was that the Canadians left the United Nations Industrial Development Organisation, and the US for a period left UNESCO.

Q41 Mr Bacon: We also left UNESCO for a period.

Mark Lowcock: Yes, and then we rejoined, as did the Americans.

Q42 Mr Bacon: That was when it was spending 80% of its budgets in Paris.

Mark Lowcock: Indeed.

Q43 Mr Bacon: And it is still down at the bottom in the red list.

Mark Lowcock: Indeed. The choice that we are left with, since the only thing we do with them essentially is pay our membership fee, is whether we would be ready to leave again. The Chair alluded to the fact that you have to build a broad alliance, because our levers as the UK are not as strong as we would like them to be. Building that alliance is crucial. It is not just about how you penalise them; it is also about how you incentivise them, because we have also given more resources to organisations that we were confident would deliver a lot of value. That positive incentive-I don’t know what a reverse shotgun is-has the potential to be quite powerful.

Q44 Chair: On the issue of your being one of 150 partners funding a particular organisation-this could have been a question I asked the previous witnesses-clearly the Australians are going off and doing their own. Although they may be building on your experience, they are doing their own, as are the Netherlands, etc., but that is not partnership. The intent is there, but how are you going to achieve it and what are you going to do if you do not achieve it?

Mark Lowcock: You are absolutely right, and of course one thing that the agencies say is that if all 150 members did their own thing, that creates chaos. We have taken a number of initiatives to join these things up. We invited all the major financiers to London for a meeting in February this year, to try and force this joining-up a bit further forward, and the German Government are hosting another meeting of that sort next month, so we are trying to gather a bigger collective alliance, but I want to repeat that we are not willing to do that at the risk of being reduced to the problem that the MOPAN system had. It is only worth joining up if you retain the bite.

Q45 Mr Bacon: Is not therefore the best way to do it to say to the Australians and the Dutch, "We’re delighted that you have picked up the work that we have been doing. Why don’t we take forward the next stage with you, together? So instead of doing a single, further full review in 2015, you, we and the Dutch-all speak English-do it together"?

Mark Lowcock: That is exactly the discussion that I am having with my Australian counterpart, and the discussion we have also had with the Dutch, the Swedes and the Danes.

Q46 Mr Bacon: That creates its own momentum, doesn’t it?

Mark Lowcock: Indeed. If we can do that while retaining the bite, we will. Why I keep repeating this is because actually some of the others ended up with rather higher scores than we did for some of these agencies, and we think that the rigour of the system is an important component. So I would like to do exactly what you said, but only if we can sustain a system that we are really confident will drive improvement.

Q47 Chair: The interesting thing in a graph-which is not in the Report, sorry, but I hear the figures are familiar to you-is the proportion of aid going to multilateral organisations over time. I took it back to the previous Government, just out of interest, and in 2008-09 it was just over 44%, in ’09-10 it dropped to 40.8%-so it dropped 1.5%-and then in 2010-11 it went up to 47.4% and in ’11-12 to 47.3%. So there was a jump, and I want to talk about the jump first and the future next. Why the jump? My suspicious mind suggests that it is because you did not have the staff in-house and this was an easy way of getting the money out of the door. Was that the case? Why the jump between ’09-10 and ’10-11, because there is a 7% jump in the proportion of aid? At the same time, aid was going up, so that is quite a hefty jump in the money going to them. Why?

Mark Lowcock: I need to check exactly what happened. There are a couple of things that will have happened. First, there is a cycle of replenishment for these institutions, and you get some variability as a result of that. Secondly, it may well have been the case, as is well known to the Committee, that at the time we thought that we were really struggling to have enough staff in the Department, especially on the front line, to deliver the bilateral programme, so of course one of things that we have now put in place is a big growth in our front line-Mr Bacon said that he had met some of the new colleagues in Sierra Leone earlier in the year-and we have spent the past 18 months to two years adding something like 300 people into our front line to manage a growth in our ability to deliver a bilateral programme, which is in fact what these figures in front of you show will happen as a share into the future. I am not sure if you are coming on to it-

Q48 Chair: I am, but in essence I hear that-it is an honest reply-but it was not a good reason for the growth in 2010-11 except to get the money out of the door.

Mark Lowcock: Essentially, I am agreeing with you, Chair. I would like to double check how far the reason was the first answer that I gave you, which was the replenishment cycle, because that might have been a significant factor.

Q49 Chair: Okay. Write to us on that. Looking at the plans, it is going down-you are at 47.3% for 2011-12, but planned for this year it goes down to 37.8%. That is deliberate, is it? Then it goes down to 36% the following year-the plan.

Mark Lowcock: Yes. We had a process, as you know, in 2010. I think it is written up in the Report that Mr Morse has just published on managing budgeting across Government. What we did in spending review ’10 was look at the set of results-children in school, people with access to water and sanitation, and all the other results Ministers wanted us to deliver-and take that as a starting point and then ask ourselves, "Okay, what does that mean in terms of the relative use of multilateral institutions, NGOs and the bilateral programme?" We did not have a target for funding through different institutions; we had a set of goals for the outcomes we were trying to achieve. The result of that competition across institutions for resources to deliver results is this trend-

Q50 Chair: So do you get them to bid? You would say, "We want to do something around women’s education in-wherever"?

Mark Lowcock: Yes.

Q51 Chair: So that is your bilateral delivered by a multilateral organisation, whereas I read this as being the core funding.

Mark Lowcock: Yes, it is. This is the core funding.

Q52 Chair: But that does not go on bids, does it?

Mark Lowcock: What we had was a process-Liz could speak more about it, perhaps, as the Value for Money Director who led the process-which started with the results and recognised that if you want to be in some of these organisations you have to pay the membership fee but then you have some choice. For example, a big, big result that we wanted to deliver was immunising 50 million children. One of the cheapest ways of doing that is to use the Global Alliance for Vaccines and Immunisation, because it buys the vaccines very cheaply.

Q53 Chair: But that is not core?

Mark Lowcock: That is core, and that is why our money to them has increased through this period, while it has fallen to some others. Maybe Liz could speak more about it.

Liz Ditchburn: I will describe how we put those things together, and where we were able to make those choices and where we were not. We looked at all the information that was coming out of the bilateral aid review, the multilateral aid review and some other processes that we were running together. We put all that on the table and divided it up into the pillars-the themes-against which we were trying to achieve results: wealth creation, governance and security, accelerated progress towards the MDGs, climate change, but we also had a pillar that was around global partnerships. Some of the large multilateral organisations were actually very much part of the global partnerships. We are trying to achieve a whole range of outcomes through a single organisation, and it is not possible, currently, to make these very direct comparisons between the way the World Bank delivers something and the way a DFID programme could.

Where we could, we put all the multilateral offers into the same pillar with the bilateral offers. For example, on education, we looked at what we could deliver through multilateral routes on education alongside what we could deliver through bilateral routes. We took value-for-money decisions where we had the evidence to support that. For example, the Global Partnership for Education is a much more cost-effective way of reaching out-of-school children in Francophone West Africa than if we were to create new bilateral programmes in those areas. We looked at GFATM-the Global Fund to Fight AIDS, Tuberculosis and Malaria-and again at whether, to reach the countries where there is a real malaria burden but where we do not have bilateral programmes, it would be better and more cost-effective to use the multilateral route or to use a bilateral route. Where we could make those comparisons, we did.

The Report that the NAO is doing is saying, "Actually, we would like you to try to find even more places where you can make those comparisons", and that, indeed, is our aspiration. As we build stronger data, as others said earlier, we would like to be able to do that. Where we can compare like for like, and say, "This is what we are trying to achieve. Let’s look at a range of delivery routes", then that is what we do. We did that where we could in the last spending round. We would hope that in the next one we would be able to do more of that.

Q54 Chair: Would it be unfair to ask you crudely, given the paucity of data, in what proportion of the expenditure you were able to make that comparison?

Liz Ditchburn: It is very difficult currently to put a number on it. There are some sectors where it is much easier to make those comparisons-for example, in education. Perhaps we can talk a bit more about the education data that we are now developing. In education, there is a level of international evidence and international data that we can use; in health, the same. In some of the areas, such as governance and security, we have very much less data, currently, although we are working hard with others to improve that. In some of the big spending areas, particularly some of the health and education areas, you can actually make those kinds of comparisons; in some of the smaller spending areas, it is very difficult-it is harder. I do not know, Mark, whether you would hazard a figure.

Mark Lowcock: That is a fair summary. In the social sectors, you can generate a lot more data than for more qualitative things, such as governance and security.

Q55 Mr Bacon: Assassinations avoided is quite a difficult one to measure.

Mark Lowcock: We’d love to have a data source for that.

Q56 Nick Smith: I was interested in Alison Evans’s point about the overlapping mandates of multilateral institutions, and whether DFID will address that in the future.

Mark Lowcock: We think it would be a good idea if more of these organisations were sunsetted. That is what happens in an environment where there is real competition for resources because people are buying a service. But, as I said earlier, that works only if lots of the members are willing to leave, so we are a bit constrained in how far we can get that psychology into things. To give an example, in the education sector one reason why we do not invest a lot through UNESCO, which is the UN’s education organisation among other things, is that we do not have a high degree of confidence in the value that it would deliver in putting more children through school, whereas we have more confidence in UNICEF and the Global Partnership for Education. We are trying through our resourcing decisions to rationalise the system in the absence of an ability to persuade the other 150 members to leave this organisation and invest more through that one.

Q57 Mr Bacon: You say, "in the absence of an ability to persuade" the other organisations, and you have alluded to the fact that you will try with the Australians, the Danes, the Dutch, and whoever. I can imagine that with 150 members, some countries will be more sympathetic and some will be less sympathetic. You have crudely identified some of the northern European countries as being likely to be more sympathetic, but how much progress are you likely to make on that with the more sympathetic countries in a reasonable time frame, and what is the time frame?

Intuitively, there doesn’t seem to be an obvious reason why you would not make more rapid progress. I understand why, however sensible it is, Irish Aid might decide that for a variety of historical reasons it does not want to collaborate with DFID and that it would rather keep its own independent identity, and so on and so forth. There are obviously reasons why that might be the case, but how far do you think you will get with this, and how soon?

Mark Lowcock: I think we will make more progress in changing the balance of funding through organisations, so we will get more money, and have done, into the Global Alliance on Vaccines and Immunisation, which is effective. We will do better on changing resource flows than on membership rates. There is a limit to how far we should keep banging our head against that wall, because every country will make its own sovereign decision. Ultimately, the resource flow matters a lot more than whether someone happens to be a member or not, so I think we can make more progress on what is more important.

Q58 Nick Smith: I like the point about resource flows. It is fantastic that the Department is getting all this money. It’s brilliant, but I come from a constituency where everyone says that the language of politics is the language of priorities. I look at that figure 13 and I am just not convinced that your approach is not just a tad timid. I want you to be more muscular and to get better value in the round. I will press you again. What are you really going to do to get these institutions in the red zone to improve their act so that you can spend the money that has been wasted there in places where it really makes a difference? I must press you on this.

Mark Lowcock: We have left about half the organisations in the red zone, so we have stopped wasting that money because we don’t belong any more. On the others, particularly the Food and Agriculture Organisation, which costs us between £10 million and £15 million a year to be a member, the World Health Organisation likewise, and UNESCO likewise, we will face a choice about whether to stay in or not. They do some things that are of value to us.

Q59 Chair: How much do you spend on the others, out of interest-the red bunch? You have taken £8 million out, so how much is left?

Mark Lowcock: I think the figures are in figure 12, if I have understood it correctly. It is about 1.4%, so something like £40 million in total.

Q60 Chair: That’s after the £8 million has gone?

Phil Gibby: To clarify, it is £8 million with the £40 million we are leaving, which is £48 million.

Q61 Chair: So it is £40 million now.

Mark Lowcock: The Food and Agriculture Organisation does some things that we think have been good. It led a campaign to eradicate a disease in cattle called rinderpest, which cut a swathe through cattle in Africa for a long time. It is only the second disease, apart from smallpox, that has ever been eradicated, so it is not as though they do not do anything useful. They also run a big famine early warning system for 27 countries in Africa, but our point is that it might not be the best thing to leave an organisation like that that also does global things such as food safety standards, which we have an interest in as a country, as well as what they do in the developing world.

The issue is: can we get them to improve, under a new director general who was elected last year, with a reformed mandate, and provide an incentive for them to do things better, so that they can compete and win-because they offer better value for money-additional resources? I think that that will be the most productive way of looking at that for the remainder of those organisations. To give another example, there is the Commonwealth Secretariat.

Q62 Jackie Doyle-Price: You give a third of their budget.

Mark Lowcock: We give a third of their budget. The reason is that historically, for many decades, the richer members of the Commonwealth have always agreed to fund what is quite a small programme of technical collaboration for the poorer members of the Commonwealth. We think that the Commonwealth is incredibly important, but we would just like them to be better at spending money. Until they are, we do not want to give them too much more.

Q63 Jackie Doyle-Price: We think it’s important, and we are providing a big chunk of its budget, so really we should be playing a bigger leadership role in making it better. What is being done about that?

Mark Lowcock: May I ask Anthony to speak to the reform programme of the Commonwealth Secretariat?

Anthony Smith: We do play a leadership role on it. Clearly, the headquarters are here. We have very intensive dialogue with the Commonwealth Secretariat, but they are an organisation that has 54 members. Each member has a vote on the board of governors. We have to persuade the Secretary-General to take bold reform initiatives that will really make a difference. He has put forward some good reform proposals that went through the Heads of Government meeting in Australia last year. We have worked very closely with Australia, Canada and New Zealand on the funding arrangements and the reform proposals, but we also need to bring the rest of the organisation along with us. We are trying hard and we hope that next month there will be progress on it. The Secretary-General will hold a meeting of all the Commonwealth to look at the reform proposals he has made.

They do some great things, such as very good electoral observation work and a lot of work on anti-corruption in Africa. There are a lot of associations. The local government association and the network in the Commonwealth provide a lot of peer-to-peer support, but they also spread themselves much too thinly in their development programme, so they really need to focus on what will make a difference.

Q64 Austin Mitchell: The praise in the Report is really for the assessment rather than for the organisations that are being assessed. Paragraph 4.9 indicates that those assessments are becoming a bit of a nuisance for the assessed bodies: "The number of separate donor assessments has been of concern to multilateral organisations. Seventeen organisations had commented to us on the increased burden of engaging with donor assessments." That suggests that you need to be getting together more with other countries to do the assessments, as Richard said in his first question. What have you done to ensure that that happens? I see, in paragraph 4.7, that you had a conference attended by 18 other donor countries in February this year. They all presumably said, "Good on yer, Poms. Well done.", but what have you done beyond that?

Mark Lowcock: Basically, there is the process I was talking a bit to Mr Bacon about. Most people who came in February were from the traditional donor countries, so, the OECD countries. We have done a couple of other things. We have been doing outreach to the kind of emerging powers, if you like. I have discussions with the Government of India and the Government of China, and various of the growing-people pay more of the bill from the middle east. We are trying to broaden the constituency for reform. The follow-up meeting to the one we had will be in Germany next month. What we would like to do is put in place and support a shared, continuous, repeated agenda of reform. But for the reasons you were teasing out of Owen and Alison earlier, we think we have to do that in a way that sustains the edge. If this starts to lose teeth it will stop being useful. So at the margin we will move forward, even if it is with a smaller group of countries-

Q65 Austin Mitchell: That’s the big donors.

Mark Lowcock: Not necessarily. I had a really interesting discussion with the people from Brazil and Mexico who are responsible for their countries’ contributions to the UN, which are growing. They said that in Brasilia and Mexico City there are much more hard-edged conversations between the Finance Ministry and the Foreign Ministry about what they get from the money they put into these organisations. So I think there are new voices we can join up with which will be a good thing and which we will try to do.

Q66 Austin Mitchell: With that co-operation do you think you will be able to get the costs of the organisations down? It is important that the money is not spent on junketing but goes directly into the purposes of aid. Will that be the result of international co-operation.

Chair: Could you pick up on the admin costs point as well?

Mark Lowcock: Indeed. At the moment the range of admin costs across organisations varies from a bit less than 1% to nearly 20%. We have started to get a better database now of the admin costs in each organisation, bearing in mind there are definitional issues. You have always got that challenge. One of the things the MAR did was establish that one of the criteria ought to be the cost-effectiveness of financial management. Through that we have got into a better dialogue on getting everyone to be transparent about their admin costs. That led us, when the budgets for UNICEF and the UN Development Programme and UNESCO were set for this year, to be able to negotiate a 5% reduction in the admin budget by working with others and having more transparency about what the real costs were.

We have similar initiatives in other organisations. There is a shared services programme that a number of the organisations are working on. There is a hiring freeze in the African Development Bank and a salary freeze. There is a change in the class of travel debate going on in some. So the secret to this is improving the quality of data and using the data to drive reform and building alliances. I would say the admin costs and procurement of vaccines, bed nets, food and so on are the big areas we can point to where, through the MAR, we have provided real, substantive improvements in value for money through the process. In some ways, it may be the biggest prizes will be on those things as opposed to who is a member of what organisation.

Q67 Austin Mitchell: That is what we want to hear. The Prime Minister is worried about the costs of Europe. So am I. I resent paying anything, frankly. I see from your schedule of efficient organisations that some of the European organisations were more efficient than I thought they were. The Department contributes some £1.4 billion to the European Union for aid budgets. Your Minister recently claimed that he was powerless over how the European Union spends your money. Given that aid has to go through the European Union, which I resent considerably, because it would be better to go direct from us with a picture of me in The Daily Telegraph handing out the money, what are the prospects of reducing that and getting more efficient spending? The image is one of endless junketing.

Mark Lowcock: It does sometimes feel like we are powerless. One thing the report does well is distinguish between those programmes of the European Union that are good and effective like the humanitarian response. If there is a hurricane or earthquake, it is more efficient for the EC Humanitarian Office to respond on the behalf of the EU than for the 27 member countries to do it, and they do a good job on that. Again, the European development fund, which is largely about aid to Commonwealth countries, is basically quite well run.

Q68 Austin Mitchell: The European Community Humanitarian Office and the European development fund are rated as very efficient.

Mark Lowcock: Yes. Those are quite good. The big problem is where, unfortunately, the largest share of the money goes, which is in the European Commission-managed budgetised programmes. Now, there are three big blocks to that really. The first is the programmes in Asia and Latin America, where we have been successful in driving the prioritisation into the poorer countries. I think 12 or 20 richer country programmes are being cut?

Anthony Smith: Twenty-one.

Mark Lowcock: Twenty-one richer countries in those parts of the world will no longer have aid from the EU, which is something that we pushed for.

The two other areas that absorb substantial resources are ones where the major challenge remains. The first is the so-called pre-accession aid. Countries such as those in eastern Europe got it before they joined the EU. It is aid to get ready. Governments in this country have always had the view that the more countries we have in the single market, the better. However, that pre-accession thing is expensive.

The second area is the neighbour programmes, especially for the middle east and north Africa. Justine Greening was in Luxembourg last week trying to build an alliance of other Ministers in member states and to work with the Commission to try to improve the efficiency and effectiveness of those sorts of programmes. The budget is set in the European Council at head-of-Government level, so the issue for me, Anthony and Liz-given what has already been determined by the time that it gets to our desk-is to work out how we can work with others to drive better reform. That is what we are working on. There have been some improvements. The OECD did a report saying that it has got a bit faster than it used to be, but there are many problems and it is a source of frustration.

Q69 Chair: I want to bring you back to admin costs, because I am pleased that you are putting pressure on the multilateral organisations, but it would be a good idea if DFID acted on its use of consultants in a way that did not appear to be wasting our money. There have been stories in the press and I have picked out one, which I am sure you know well. The Adam Smith International received £37 million from DFID last year. William Morrison, the managing director, gave himself a pay increase when everyone else’s is frozen and now earns over a quarter of a million. He also paid himself a dividend of over £1 million, which I assume comes from public money. That feels like an absolutely outrageous and appalling waste of this very precious money that you have secured to invest in developing countries and it is really depressing to read about.

Austin Mitchell: And it is exactly the opposite of what they want. Promoting the free market in the third world is the exact opposite, I would have thought, of what the third world needs.

Chair: That is an aside.

Mark Lowcock: As you know, Justine Greening commissioned a review on this as soon as she arrived.

Q70 Chair: So are you cutting this organisation out?

Mark Lowcock: She made an announcement yesterday, following the review that Liz and her team did, which Liz can perhaps speak to in more detail, about some new steps that we are taking to control-

Q71 Chair: Are you cutting them out? I think it is outrageous. I cannot believe that you cannot find people-looking at the people who gave evidence to us-who cannot do the same work with better value for money for the taxpayer.

Mark Lowcock: We want to drive the best value. In terms of the example that you gave, Adam Smith International, some of the things that they have done have won prizes. For 10 years, they have been building the tax system in Afghanistan-

Q72 Chair: I understand that they are the ones that have gone into Afghanistan. It is just that we see this time and time again. This is not an ideological thing, but if the private sector is going to get involved in delivering public sector services, wherever they are, then I hate to see what appears to be the taxpayer being ripped off. It appears to be an instance of a private company coming in, having seen your budgets growing and that there is lots of money around, and ripping off you, us, me, all of us.

Mark Lowcock: The Secretary of State is having them and all the other suppliers in. She has made it clear that we are not willing to work with people if they are only in it for the money.

Q73 Chair: Why did you work with them? This did not need a change of Secretary of State. I am delighted that Justine Greening is doing the job-I have a lot of time for her-but it is a shock that this happened.

Mark Lowcock: We need a competitive process so that we can get the best value and the cheapest cost. From my perspective it is a healthy thing, not least because, as Owen was saying, we are a lot more transparent than we used to be.

Q74 Nick Smith: Are you saying that the organisation that promotes free markets has a monopoly position?

Mark Lowcock: Actually, one of the things that we have been successful at is growing a supplier base. My Australian counterpart basically has only four main suppliers. We have 20, so we can drive more competition, but there absolutely is a conversation to be had with Adam Smith. We have some other things to do, coming out of the consultants review, as well.

Q75 Chair: Are you cutting them out?

Mark Lowcock: We are not going to debar people unless they do things that are really egregious, such as getting involved in corruption.

Q76 Chair: So have all their contracts come to an end? How many contracts have these guys got with you?

Mark Lowcock: I do not know the number offhand.

Liz Ditchburn: I do not know the number of live contracts.

Q77 Mr Bacon: Define "egregious". How bad does it have to be before it is really bad? How deep does their snout have to go into this enormous trough? How many millions do they have to take out before you say, "That’s a bit too bad; we’re going to act"?

Mark Lowcock: By "egregious", what I meant was that we debar people who are involved in fraud and corruption.

Mr Bacon: Well, that is reassuring, although it is not always the case, of course. In fact, in the Department for Work and Pensions they sometimes invite people back to bid for more.

Q78 Chair: Mr Lowcock, I know a lot of people who work in the aid world, and one of the aspects of working in the aid world is that you do it for very little money. On the whole, people get paid very little; they do it for all sorts of very good, value-based reasons. That makes it doubly horrible to see somebody-I do not know this guy from Adam-come along and think that they can take a cool £250,000 a year out of it, plus a dividend of over £1 million.

Mr Bacon: It is absolutely extraordinary. It is no more extraordinary than the CDC chief executive paying himself £970,000 a year, I grant you that, but this sort of thing surely should not be going on.

Mark Lowcock: The issue for us is how we make sure we can provide a quality of service or resource to developing countries that want to grow their tax system at the best cost. We need to attract the right level of expertise in.

Q79 Mr Bacon: We have one of the world’s leading tax administrations, or at least that is what HMRC often tells us.

Mark Lowcock: And one of the things we are doing with them, which has not been possible in the past, is working together to see whether we can use them more to deliver these services.

Q80 Mr Bacon: Why hasn’t that been possible in the past?

Mark Lowcock: I think HMRC have felt that they had quite a lot of other things on their agenda.

Q81 Mr Bacon: Or it might have been that other countries, looking at the mess HMRC had made of our system, did not want them making a mess of theirs as well.

Mark Lowcock: I would like us to do more of that, and we are in discussion with Lin Homer and her colleagues about it. My main point is that the more competition we have, the better we will do at improving value and driving down price. That is the thing.

Q82 Mr Bacon: Are you sure that you will not just end up inviting in people who are good at bidding? This is a fundamental and long-lasting concern of mine. I was in Sierra Leone working for VSO; I did not get paid anything, but I thought it was still an interesting thing to do. I was slightly vexed that all my colleagues who were with me, including three other parliamentarians who were with an Oxfam trip, immediately got on a bus and went zooming around the country to look at things while I was stuck behind a laptop in Dar es Salaam for 10 days. "This is development," I thought.

Anyway, I remember a conversation between the director of the body that I was working with, which was a very small, embryonic body that was squatting, if I can use that word, with a much larger, well established Irish NGO that let them have some office space for free. The director of the organisation I was working with said, "I have been offered €200,000 and I cannot use it." He realised he had capacity problems, because the organisation was very nascent and embryonic, so he had the honesty to say to this other chap, "I can’t use it." The money was obviously floating around, however, and they wanted to give it to somebody. The ears, eyes and eyebrows of the other director pricked up considerably, and he said, "I think I’ll have a bit of that." That is how it works. There is money floating around out there, and the people who are good at bidding for that money get it. A separate question remains on whether the money is well spent on the ground afterwards. We have seen many times here with PFI and lots of other things that bidding for money and persuading someone you are capable of doing something is very different from doing it.

Mark Lowcock: I completely agree with all that. What we need is more competition to drive down prices, and then hard, tough monitoring to ensure the delivery gets done.

Q83 Chair: Liz, do you want to add anything to this conversation?

Liz Ditchburn: The first thing to say is that although Adam Smith etc. hit the headlines, amongst all of our suppliers there is a huge diversity of firms and organisations involved. We have not-for-profits and a range of academic institutions doing work for us; there is a whole range. There is an issue, but I want at least to put on the table that there is great diversity. As Mark says, we want to increase that diversity and supply base even more. There are particular markets, particularly in some of the most fragile environments, where we are struggling to get enough competition and enough people bidding. We have been doing a lot of work over the past year to look at all the requirements that we think we will have this year and next year, to take stock of those requirements in aggregate, and to think about how we can approach the market more intelligently for those requirements in aggregate. As a result, we are putting in place framework contracts, the express purpose of which is to bring new entrants into the market and bring greater diversity into the supply base.

Q84 Mr Bacon: It is perfectly obvious, frankly, that you are not going to get a huge number of takers if you say to the market, "How about you bid for the chance to go and set up a tax system in Afghanistan?". You could say, in terms of classical economics, that the price will therefore be very high, but there is another response to a lack of suppliers-you have said you are doing this in relation to HMRC, but the point is general. There are lots of things that you want supplied for which there are not mature, well developed suppliers who can do it efficiently, effectively and economically. You could insource-do it yourselves-because you have huge numbers of skills across government. Are you looking at that?

Liz Ditchburn: Yes, we are.

Q85 Mr Bacon: Systematically, across the piece?

Liz Ditchburn: There are two things. First, we are looking at ensuring at the design stage that we think through those aspects in advance. The new business case process, which people have been going through for the past couple of years, requires people to do a commercial case. That gets them to consider how they are designing it and what impact that will have on their approach to the market, so that they do not design out what the best routes might be. Forcing people to ask that question at the beginning is one thing that we are doing.

Q86 Mr Bacon: You are forcing people to ask how Government Departments or agencies could collaborate with providers?

Liz Ditchburn: Absolutely. Rather than assuming that the correct delivery option is going to be to contract someone commercially to do it, people have to think about what other delivery options they have. That is one thing at the design stage. We know that if you get the design stage wrong, you are stuffed. You have to get some of that stuff right at the beginning.

Secondly, as a result of the review that the Secretary of State has asked for, we are also looking again at some of the business model questions about in-house/outsourcing and whether we have that boundary right. We are also actively developing the supply market in particular areas. Where we find an over-concentration and, therefore, insufficient competition, we are actively working to ask how we can bring others into that market and how we can actively invest in market development. That, again, is the kind of response that a mature procurement system ought to be looking at. We are doing a range of things.

Q87 Mr Bacon: It is not necessarily the case that you need more suppliers. When I turned on my radio, I happened to catch Margaret on "File on 4" last night. I listened to the whole programme, which talked about a variety of things, including insourcing. It gave the example of a hospital that had been purchasing from Serco a range of services, including all the laundry. Serco subcontracted that work to Sunlight, and the hospital eventually said, "Why don’t we just contract directly with Sunlight?". They now have fewer suppliers, not more, but that saved the hospital 8% to 10% on its laundry bill.

Liz Ditchburn: DFID has always run its contracts through full competition via the European directives process, but we know that running the process does not guarantee value, and that you have to run the process with intelligence and professional skill. One of the things we have been doing over the past two to three years is really putting in place a professionally skilled team-they are now all qualified and are a mix of people from a range of backgrounds, public and private-to up the standards of the central procurement function and to put more people with procurement profession and skill on the front line. You can run the process, but you cannot guarantee value. It is about running those processes intelligently and asking exactly the same kinds of questions that you are suggesting.

Q88 Mr Bacon: Once you have set up the framework contract, which I understand to be a way of avoiding going back, and back again, through the European general process, can public sector bidders become part of that framework alongside others, so that they can go off and do the work directly?

Liz Ditchburn: They would have to go into the framework at the beginning.

Q89 Mr Bacon: That is what I mean: do they? Are they invited and encouraged to? You say that you are talking to HMRC; great, but what if it says, "We can help you"? Will somebody turn around and say, "Actually, you have not been through the framework process; you are not eligible"?

Mark Lowcock: No. We have another vehicle for adding the public sector capacity, if you like, because not every public sector body wants to go through the competitive process. We have another vehicle, which is essentially a framework that we have been building up to strengthen links across the public sector, so that we can help them to create capacity to supply services that we can pay for.

Q90 Mr Bacon: Are you finessing the boundary between-what is that body called?

Mark Lowcock: It is a thing called iFUSE, which we-

Q91 Mr Bacon: iFUSE?

Mark Lowcock: Yes. It is not a great name. I would not defend the name, but it is basically a network and a platform, and HMRC are one of the bodies in it. We do a lot of this already, on anti-corruption, for example, with the Met police, the City of London police, SOCA and so on, quite successfully.

Q92 Mr Bacon: But as well as the boundaries between bilateral and multilateral, are you finessing the boundaries of what goes through that route, as opposed to what goes through the private sector bidded-for framework route?

Liz Ditchburn: That is one of the choices that we need to get on the table as a set of options at the design stage, so that rather than getting as far as saying, "Oh, now we’re using the framework. Oh dear, they’re not on it", we are saying, "No, wind right back. Actually, we have an option here which is delivered through iFUSE, leveraging in public sector experience, or an option to deliver through a commercial contract. What are the pros and cons of those two options?".

Q93 Mr Bacon: Do you think it might be more successful if it had a name that people could remember and be proud to work for?

Mark Lowcock: I am happy to take advice on the name, but yes.

Q94 Nick Smith: I am not persuaded by Mr Lowcock’s earlier answer about the Department’s response to this business with Mr William Morrison, who is pocketing oodles of Government cash and is almost filling his boots. Is the Department going to be checking his company’s bills rigorously over the next few weeks, to check for overpayments and ensure that we are not being ripped off? What is going on?

Mark Lowcock: We do that all the way through the process. Liz may correct me if I am wrong, but I do not think that we think there is a major problem on the invoicing rate. I think the problem is that when we started some of those programmes, there were limited numbers of bidders and we had a choice-we are trying to avoid being in this position in future-of whether to take that contractor who could supply a difficult service in a highly dangerous environment or not to proceed at all. As I said, Justine Greening is inviting the major suppliers, including Adam Smith, in for a conversation, and is making the point to them that we are not interested in working with people who are only in it for the money. It is the value and value for money that is important.

Q95 Nick Smith: Listen, we get your points about a mature procurement system, and all that seems fantastic in principle, but this company is making 10% profit on the work it is doing, which is a very good return on investment. This bloke is giving himself over £1 million-worth of dividends as a bonus. That is just wrong; it is greedy. You really have to climb over this company and make sure you get a good return for the taxpayer. You are just not persuading me that you are doing that.

Mark Lowcock: Well, they have won the contracts through a process. We are going to have a further set of conversations with them. The best place for us to be in is to find, when we have future work to commission, that there are so many other bids are coming in and so much competition that we are falling over people who can do it for a cheap rate.

Q96 Chair: Mr Lowcock, last week we had a hearing with DECC, which was anxious to establish a competitive field and a whole load of bidders in an obscure bit of the energy market. The way they did it was to put such a fantastic deal on the table that anybody would be a nutty not to invest in it. So there are ways of establishing your market. I think this guy clearly came in too high and should not have been given the contract in the first place. You can get over-sophisticated in this. We are not very good at creating markets.

Mark Lowcock: I am certainly happy to talk to the DECC people about what we can learn from them-and across Government.

Mr Bacon: I don’t think you will learn anything from that.

Mark Lowcock: Well, anyone else who can help with this.

Q97 Jackie Doyle-Price: What you have said about the lack of competition and few suppliers is telling. Having run a bidding process, having not been satisfied by the number of suppliers that came forward, and having had questions about some of the prices that they came forward with, have you suspended any of the processes at all during this time?

Mark Lowcock: Yes. It does not happen a lot of the time. I cannot think of examples, but there are certainly cases where we have got part of the way through the process and just concluded, "We’re not going to come to a good answer here. We need to redesign the project maybe, or find some other solution." It is a trade-off, because in places like Afghanistan or some of the other highly insecure countries, it is a good goal to help them to increase their tax tally. We are sometimes in that position, and we then have to manage the trade-off.

Q98 Jackie Doyle-Price: Where we need to get to when we look at the value for money of these things is, "Are we delivering the outcomes that we’re trying to get?" It is a judgment call, isn’t it, about how important those outcomes are?

I was very encouraged by what you said at the beginning, Liz, about how you are looking at the outcomes that you want to deliver, and then looking at where you can deliver those outcomes through multilateral organisations. I would say generally that the DFID programme is very outcomes-focused. However, once you have actually decided where you will put the money, and have awarded it to a particular organisation, how do you ensure that those outcomes are delivered? I ask that because in paragraph 2.14 of the report, we are told that "The Department’s assessments didn’t include comprehensive information of the development results they have achieved." It rings an alarm bell in my mind that you are looking at the best fit to spend the money, but then not necessarily following through on whether the money has really delivered what you want.

Liz Ditchburn: Anthony might want to say more about how we follow up and monitor performance and delivery of results by the multilateral organisations, because it is slightly different if you are giving core finance; obviously, you are only financing a part of their results, and it is the overall that you are interested in. Perhaps I could talk a bit about how we do that in the rest of our programmes, where we have a very clear amount of money to deliver a particular set of results.

The expected results are laid out very clearly in the business case, and on that basis the funding is agreed. There is then an annual review process, whereby the teams will look at the evidence of what has been achieved and score that against the expected results. We introduced a new scoring system a year or so ago, which kind of ties that more tightly. The teams have to compare-"Year 1, we expected this much; how much did we actually get?", "Year 2, we expected this much; how much did we actually get?"-so that we have a clear milestone for each year. Then the project is scored against whether it achieved that milestone or not-whether it overachieved or underachieved.

There are two things. At the level of the programme, the annual review, obviously, if there are problems and there is underperformance, that should lead to actions, a questioning of whether the programme remains value for money and should continue or stop, and whether there are actions that can be taken to get it back on track so that it does achieve. For each programme, we have that annual review.

We also then pull all those annual review scores together into an overall portfolio quality index, which the management board monitors very closely, so that they can check the overall quality and performance of DFID’s portfolio. Maybe I could pass to Anthony to talk more about the multilateral side.

Anthony Smith: What we got through the multilateral aid review was better comparative information than we ever had before about the way that all the different organisations that we provide significant funding to deal with results, and each individual assessment tells you something about what we thought about the way that they did it.

Several organisations, like UNICEF, have fantastic stories to tell about the individual results that they achieve in different situations and countries, and on different issues, but in the organisation itself, they are very bad at saying what results they had planned to achieve, and what the overall impact is that they get with their money; their results management, if you like, is not good.

Through the MAR, we are able to ally with other people on the boards of those organisations, to try to get improvements in those results frameworks. We have found that through the MAR, through publishing all this information and starting a dialogue with other countries and donors, we are getting the organisations and the other donors that are working on this coming to us and saying, "Okay, how can we improve our work on results?"

Some of the most interesting areas have been around the standard-setting organisations to which Mark and others referred earlier. I disagree with what Alison said about us not valuing as much the work that they do through the framework, but we found that those organisations never paid very much attention to linking the work that they did at headquarters on standards with outcomes on the ground in poor countries. Therefore there was no evidence about the way that the work that they do, which is clearly very valuable in many cases, had an impact on poverty reduction. Now we have quite a good dialogue with them about developing systems to draw a line between that headquarters work and what is happening on the ground. In every different institution, we have a set of reform priorities, many of which are around results and results frameworks. Some organisations are very good. The World Bank is quite good at saying, "This is what we plan to achieve over the next four years", but others are not.

Q99 Jackie Doyle-Price: I know that we keep going back to figure 13 and pointing out these underperformers, but in looking at these relationships, there is a dimension to them that goes beyond delivering aid programmes. Obviously, the diplomatic relationships that emanate from those organisations also help deliver the wider objectives. Is there anything you can say that helps us put a value on that to address the points that are made in the NAO Report about why we have suspended relationships with only four of the nine underperforming organisations?

Mark Lowcock: You are right. The UK is a member of the Security Council of the UN. We have always attached value to the fact that we have a big international presence and diplomatic clout, and that arises partly from the fact that we have a universal membership of lots of things. That is a factor that we discussed with the Foreign Office before agreeing that we would leave four organisations. The trick is to quantify the value to us of being a member of a standard-setting organisation. The World Health Organisation provides the world advice to countries on drug protocols and treatment systems, and that is a global public good. It is really difficult to quantify a benefit to a particular country for that. Somehow we need to do what Anthony said and work out how well they perform that function and how well they support developing countries doing it, and then reach a balanced judgment, but it is not something that can be reduced to a mechanistic formula or a single number. We just have to recognise that.

Q100 Austin Mitchell: Why didn’t you test the effectiveness of the multilateral organisations as against other alternative mechanisms of delivering aid? I see that paragraph 15 says that only four organisations in total were tested against alternative options for delivering the same objectives. Why did you not administer that test more frequently, especially to the European organisations?

Mark Lowcock: The European organisations are a bit difficult because we have treaty obligations. What we have tried to do is apply that test to the organisations where we can take meaningful decisions as a result of the outcome of the test. Part 3 of the Report gives some examples of the places where we did that. It is on things such as vaccine procurement, bed net procurement, and the provision of education services and water and sanitation supplies and systems. For organisations that have a specialist role in those things, we were able to do more comparative work than we could on some of the others.

Q101 Austin Mitchell: That proved to be more effective?

Mark Lowcock: Yes, and it did lead to effective judgments. What we would like to see is larger numbers of these organisations with much better results data. If they all said, "We maintained x thousand kilometres of road and it cost us y pounds", or "We financed the training of x thousand agricultural extension workers and it cost us z pounds" it would give everybody, not just us, a better database on which to take funding decisions.

Q102 Mr Bacon: Why don’t they?

Mark Lowcock: Because they did not have a strong enough incentive until the likes of us came along and said, "Unless you do that, our funding is not going to be what you would like it to be."

Q103 Chair: Obviously, there are some areas where it is easy to do that: children attending school, injections given and so on. I am talking to the VSO about women’s empowerment; I don’t know how the hell we measure that. There is danger in your methodology that you will crowd out qualitative measures, which are equally important in building capacity. In an odd way, they are probably more important, in that they build the country’s capacity, rather than simply adding in aid.

Mark Lowcock: I agree completely. There are some organisations that play a globally important role that may not be able to generate good metrics, but to which we are nevertheless excessively generous contributors. UN Women is one of them, for exactly the reason you mention. If more countries did a better job of empowering women and gave better opportunities to girls, it would transform all sorts of things. Although UN Women is a young organisation with some management challenges, we have been generous in our funding.

Q104 Chair: So in your framework of assessment, are you having regard to that, or will you in future?

Mark Lowcock: Yes.

Q105 Chair: I do not think this one did it brilliantly, but I accept that you have to move on.

Mark Lowcock: Yes, you are right about that. On page 19, the framework is set out. In item 2, "attention to cross-cutting issues including gender" is the box in which we have that. It may be that in future, we need to give more weight to that box in the overall assessment, at least for some agencies. That would be a way of addressing exactly the point that you made.

Q106 Chair: The other similar point is that performance measures will differ from context to context, won’t they? I do not know how you can deal with that if you are trying to do a comparative bit of work.

Liz Ditchburn: Aren’t there two aspects to this? A strong and effective organisation is one that measures, monitors and manages the things it cares about. It has to set what it cares about, and then it has to put in place appropriate measures. For example, if a body is focused on women’s empowerment, if it is a strong and effective body, we should expect it to try very hard to think about how it measures, monitors and manages that. There is something about organisational effectiveness: how do you judge an organisation? That depends on the organisation itself and what it is trying to achieve. But if we want to reach the sort of data availability that Owen and Alison talked about earlier, we also need to work very hard on comparability to make sure that we have comparable measures across the whole international system. Otherwise, neither we nor developing countries’ Governments, nor others who put in resource, will be able to make those comparisons.

That is where we are investing, for example, in the education work that we are looking forward to reporting to you in a couple of months’ time. We are not only managing and looking at the set of core metrics that we have already talked to you about; the Department is currently working on a new metric around cost to read. How much does it cost to get a child to a stage where they can read? Can we start to build that so we are actually looking at the cost of delivering a learning outcome, rather than just at the cost of input or some of the outputs. We have got those data in five countries now, and we have been working to take that forward.

Q107 Mr Bacon: When you say "rather than the cost of the input", do you mean that you are not going to be measuring the input?

Liz Ditchburn: For example, the kinds of metric that we are already looking at are cost of supporting a child per year in a school; teacher salaries, which is obviously an input cost; completion, which-

Mr Bacon: My question was about-

Mark Lowcock: We’re not going to stop measuring those things.

Liz Ditchburn: No, we are going to measure all those things too.

Mr Bacon: Good, because my question was about-

Liz Ditchburn: No, absolutely-

Q108 Mr Bacon: If I can just finish my question, then you may answer it. My question was about your use of the words "rather than". That made it sound like you were going to do one rather than the other.

Liz Ditchburn: Sorry, I should have said "rather than just". The key thing is that to get that effective database, we need a suite of metrics that operate at all these different levels. There is no single metrics "per sector" that is going to work, so we need the input and output measures, and we also need to start building some of those metrics, which often do not exist currently, around what it costs to deliver a unit of learning outcome.

Q109 Mr Bacon: We need that here.

Liz Ditchburn: That is where the exciting international work is. If we can work with partners to start to get those kinds of metrics in place, we will be in a position to judge not just whether an organisation does this well, but whether we have data across the piece to make those kinds of judgment.

Q110 Austin Mitchell: I can see that contributing to these multilateral organisations earns us international Brownie points, kudos and things like that-"British chaps are always sound and always deliver." The situation now is that I am finding aid increasingly difficult to justify when I go around Nunsthorpe. Folk read stuff in the Daily Mail-they do not read The Daily Telegraph, so they will not have seen the stuff about this bloke Adam Smith, whoever he might be, whom the Chair has mentioned-and ask why we should give aid to India when it is firing rockets into the air or to the moon or wherever, and why we should give aid to Africa when they only go out and kill each other with machine guns. What I am saying is that aid to multilaterals is difficult to justify electorally, to the people, because there is nothing to show for it. If you can show water brought on tap, kids educated, Ugandans taught to cook fish and chips or some other direct results, it puts the case for aid far better.

Chair: To help the Grimsby economy.

Mr Bacon: To help the Grimsby economy-Grimsby fish, no doubt.

Austin Mitchell: To cook fish and chips in Uganda-a delegation went out from the Grimsby Institute.

Chair: That was a wider question, so a brief answer, and then I want to bring in Richard.

Austin Mitchell: Is it not more useful to give direct answers-and more convincing to the people?

Mark Lowcock: I completely agree with that. The biggest thing that we need to do is explain the value that we get from the investments we make. If I may give one example, by investing with others through the Global Alliance on Vaccines and Immunisation, we have driven down the costs of vaccines. There is a vaccine against pneumococcus that stops children getting respiratory infections; we have been able to reduce the cost by 90% compared with what it is in an OECD country by working with the market and the suppliers collectively, so that we can afford to inoculate 10 times as many children and babies in the poorest countries, to stop them getting this killer disease. Those are the stories that we need to tell. Likewise, if a woman and child sleep under a bed net, they do not get malaria. By having a multilateral approach, which we supported, we have driven the price of a bed net down from £3 or £2 over the past few years. Those are the value-for-money stories that I think everyone understands, and that is the focus.

Chair: We have a final value-for-money question.

Q111 Mr Bacon: I want to ask you about the recent press reports on budget support for Rwanda, which you will be familiar with. It was reported in the press that just before the reshuffle, the then International Development Secretary authorised the reinstatement of budget support, which I think had been put into the deep freeze or had been suspended. First of all, is it correct that it had been suspended?

Mark Lowcock: What happened was that we were due in July to make a decision on the budget support release, and Andrew Mitchell delayed that decision until August. In July, having consulted across Government-this was not a decision just made in DFID; it was a shared decision-he told the Rwandan authorities a bunch of things that he wanted to happen before he made the release in August. August arrived-he was still in post-and he consulted his colleagues again, and he decided that he would release half the money and use half of it in another way. He said to the Rwandan authorities, "There is a bunch of other things that we think you need to do to normalise this situation." Justine Greening is having a series of further conversations, because we have got another decision due in December.

Q112 Mr Bacon: The things that he had said he wanted to see happen before he released the money-did they happen before half the money was released?

Mark Lowcock: The reason why he did not release all the money is that not everything happened, but there was progress on a number of things. I have not got all the detail in front of me, but Ministers have made ministerial statements on this subject, and the story has been put into the public domain, so I would be happy-

Q113 Mr Bacon: Is it correct that the decision to reinstate half the money was taken just hours before the reshuffle?

Mark Lowcock: There was a process that ran for several days at the back end of August, which involved cross-Government discussion. I cannot remember exactly, Mr Bacon, but it was a few days before the reshuffle; that is my recollection.

Q114 Mr Bacon: Did you ask for a letter of direction in this case?

Mark Lowcock: No, there was no-

Q115 Mr Bacon: You were not concerned that the reinstatement of budget support might be irregular or improper?

Mark Lowcock: I was not concerned about that. I followed carefully the policy-making process. I was satisfied that officials provided balanced, honest, objective advice, that there was cross-Government discussion, and that Ministers reached a decision and communicated the decision. I had no regularity or propriety concerns.

Q116 Mr Bacon: I have concerns about-I am sure the Chair will have other questions-budget support. We have looked at this twice; it was going up and now it is going down. What proportion of the total aid to Rwanda goes on budget support?

Mark Lowcock: I do not have the figure in front of me, so I will write to you if what I am about to say is wrong, but I think in general it is something like 40% in the current year, but I may be wrong on the figure.

Q117 Mr Bacon: That is pretty high. The general thrust of the Department has been to shift away from budget support on the basis that it is not a particularly effective way of doing it.

Mark Lowcock: You are right that overall across the Department the share of budget support is falling, but it is being sustained in those countries where there is a good track record of using the budget to deliver important development outcomes. Rwanda has one of the world’s best records over the last decade in reducing the proportion of people in extreme poverty, getting their girls into school and keeping them there, building a social safety net system, and reducing infant mortality. They do that through the way they use their public sector delivery system, so our concerns were not mostly on the use of public expenditure side. They were to do with some of the other partnership principles that we have with Rwanda on the way they fulfil their wider international obligations and that kind of thing.

Q118 Mr Bacon: Not fomenting war with their neighbours, basically. Nodding does not feature in the record, so-

Mark Lowcock: We do not think that anybody should foment wars with their neighbours in the absence of a UN Security Council resolution, or that kind of thing, where the world decides that that is what we should do.

Q119 Chair: Just for completeness on this-I am sorry to jump in on this one, but obviously it is current-you said that there were consultations across Government. Were there consultations with the other donor countries?

Mark Lowcock: Yes. I had a number of discussions. Not every donor country reached the same view, but there were certainly lots of discussions about the topic.

Q120 Chair: And was the President rung personally to be informed about the decision?

Mark Lowcock: I cannot remember the series of conversations between us and the Rwandese. I am sure that we can tell you the factual answer to that. President Kagame was in London in July, and he had conversations with a number of members of our Government at that time.

Q121 Chair: So he might have been personally informed of the decision at that time.

Mark Lowcock: I am sorry, Chair, I would need to check the facts. I do not want to mislead you on something that I have not prepared for. If I may, I will write to you on that.

Chair: Okay. Thanks very much indeed. Congratulations. We look forward to further progress in our future sessions.


[1] Note by witness: In 2010/11, bilateral aid delivered through the multilateral organisation was about £1.5 billion, approximately 35% of the bilateral aid programme. Approximately 63% of the total DFID programme is provided through multilateral organisations, Source: Statistics on International Development 2011, Table 3.

Prepared 8th February 2013