Examination of witnesses (Questions 153
WEDNESDAY 3 JUNE 1998
and DR JAMIE
153. Good morning. I think we have met Dr
Reynolds before. Would you be kind enough to introduce all three
of you and explain your functions?
(Mr Coverdale) I am Alan Coverdale. I head up
a department in DFID called the Eastern Europe and Central Asia
Department which is responsible for Knowhow Fund spending in Russia
and the 11 other countries of the former Soviet Union and also
for relations with the TACIS programme on behalf of the UK. Mark
Lowcock, to my right, is head of our European Union Department
in DFID and as such is responsible for overall DFID policy to
the European Union. To my left is Dr Jamie Reynolds from the Department
of Environment, Transport and the Regions. He is from the European
Environment Division of that Department and is responsible for
cooperation with the Central and Eastern Europe and NIS countries
under the Environment for Europe framework and for the Department
of the Environment's overall policy strategy and project development
for environmental projects under the Knowhow Fund and the Environment
Knowhow Fund. I should perhaps explain too that we wanted very
much to bring our environment adviser from DFID along with us
but he has the excellent alibi of being on honeymoon. We could
not break that. In introducing Dr Reynolds, I wanted to emphasise
that DFID has worked very closely with DETR on environmental questions
in the transition countries and that has been a very productive
working relationship. We have provided a memorandum to you.
154. Yes, an excellent memorandum. We are
very grateful to you for that and we are delighted by its frankness
which we do not always get from some government departments. It
is very useful indeed and we are very grateful to you for the
amount of work that must have gone into that. In response to your
introduction, is it difficult for you, spread across two departments,
to work in relation to such a complex area? How do you liaise
with each other? It is a sort of divorce that you are working
through, I suppose.
(Mr Coverdale) The division of labour I think
so far has been quite clear and has worked. We were actually just
discussing whether we should revisit it now in the light of the
new strategies being pursued. The Department of Environment's
interest has principally been twofold. First, in the fact that
the Environment Knowhow Fund money has been DETR money and it
suited DETR for DFID to administer that money and to handle the
project management involved in that money, but there has been
very close liaison on the strategic approaches and the choice
of projects and all of that. The second element of our collaboration
has been that DETR is very well informed on the wider framework
on the Environment for Europe process and all of that, which is
not a dimension that DFID attempts to follow very closely.
(Dr Reynolds) I would certainly agree with everything
that Alan has said. The only other point I would add is that one
of the characteristics of environmental policy is that it has
a very significant, international dimension. It is very clear
because of global and European regional environmental problems.
The cooperation between all the countries of the European region
is close and has developed over 20/25 years. The link between
assistanceparticularly assisting the Central European and
NIS countries with their environmental problemshas to be
closely integrated with that broader framework. That is why we
155. DFID traditionally dealt mostly with
the Third World, I think. It is only more recently perhaps that
you have been involved with what are called the transition countries.
Has it been easy to make that change in focus? How do you balance
those two responsibilities: traditional Third World impoverished
countries and countries with collapsing industries rather than
industries that need nurturing?
(Mr Coverdale) Under the previous government,
the Knowhow Fund programme was administered by a joint department
which in some ways was a little detached from both departments
because of that. Under the new administration, we have been brought
under DFID and under a government with a very clear emphasis that
the umbrella for the aid programme should be poverty reduction
and an intention to increase the allocations to the poorest countries.
I think for a little while the jury was out on the Knowhow Fund
and on our work in the transition countries. As ministers and
officials considered this question, they realised that in fact
poverty is very widespread and very real within the transition
countries. There is very considerable income poverty but there
are also problems of increased inequality, poverty of access to
rights and information, and there are real needs. Also, our work
so far had a very high reputation and was well respected in these
countries. Therefore, the decision was taken that we should continue
to take an interest in these countries. In particular, we should
continue with our Knowhow Fund programme of assistance, but with
a significant change of emphasis towards seeking to ensure that
the benefits of transition, when they come through, are spread
through all levels of society and are sustainable. That last point
has meant that we now place more emphasis on the environment.
156. According to the White Paper that came
out at the end of last year, something like 30 per cent of UK
development is now through the European Union rather than independent,
bilateral aid. Is that a trend that you see continuing so that
a greater proportion of our aid to developing countries is channelled
through the European Union rather than things like the Knowhow
(Mr Lowcock) Our current forecast for the current
financial year, 1998/99, is that about 34 per cent of DFID's total
programme would be channelled through the EU. I would like to
give you that figure with a health warning, if I may. It is quite
difficult to forecast these figures because they depend on actual
levels of spending in the EC, on changes in exchange rates and
on variations in the UK's share of the total EC budget. That is
our current forecast. In the medium term and the longer term,
this ratio will depend on two things. Firstly, overall EU spending
which is attributed to the DFID budget. Secondly, the overall
DFID budget. On the first, EU spending on its external assistance
programmes is set to continue to rise quite substantially over
the medium term. That is partly because a decision taken in Edinburgh
in 1992, under which the provision within the overall EU budget
for external assistance programmes was increased by 180 per cent,
has yet really to come through in a lot of spending. There is
a backlog which needs to be caught up. It also arises on our current
estimate from the likelihood that, for the budgetary framework
that will be set for the first part of the next century, there
may be further increases on the external assistance programmes
of the EU. Whether this means that the share of the DFID budget
going to the EU also increases depends obviously on the overall
DFID budget, which is a matter at the moment for the Comprehensive
Spending Review, on which we do not yet know the outcome.
157. Do you know what proportion is split
between the old east European countries and the old Soviet Union
countries and what goes to Europe or not?
(Mr Lowcock) Of the 30 per cent figure, about
five percentage points goes to the Central and Eastern European
countries and about two or three percentage points to the NIS.
That means that, of the EU's overall spending on its external
assistance programmes all over the world, about 15 per cent of
the EU's money goes to the Central and Eastern Europeans and about
seven or eight per cent currently to the NIS.
158. Mr Coverdale, your White Paper at paragraph
3(3) starts off, "Conservation and sustainable management
of the environment are a corner stone of our approach to international
development." Do you feel that there is a full understanding
between the UK government and the Commission with regard to environmental
programmes targeted at the NIS?
(Mr Coverdale) I think the answer to that is yes.
The Commission has made a number of statements on various occasions
which indicate that it recognises the importance of environmental
issues and in particular the Amsterdam Treaty last year requires
that environmental policies should be integrated into all other
policies within the Commission, which includes its development
programmes and includes TACIS. I think there is the framework
there of commitment which is entirely satisfactory. It is nevertheless
one of our objectives to encourage the Community to integrate
environment and sustainable development into its policies and
programmes and to press them quite hard on this to do it more
and more in practice. In particular, we have used our present
presidency to encourage more emphasis on the environment under
the TACIS programme. European ministers at the Aarhus conference
in June this year will invite the PHARE and TACIS programmes to
play an increasingly important role in assisting countries in
the region to implement the principles of the environmental action
programmes for Central and Eastern Europe. There is quite a good
umbrella but also quite a lot of action on our side to encourage
159. But initially the TACIS programme did
not include the environment as one of its specific objectives.
It is only in the last three years.
(Mr Coverdale) That is right.
160. It is rather an afterthought, in a
way. At least that is how it looks.
(Mr Coverdale) I think it has been evolving, yes.
161. Although one says that sustainable
development should be part of policies, we say that about our
own policies, do we not, but it is rather lip service, is it not?
Most departments are not terribly excited about environmental
concerns or sustainable development. Is that unfair?
(Mr Coverdale) I think it is unfair with regard
to DFID and the lessons of past development work, past aid work,
when people have taken a long hard look at past efforts in the
sixties and seventies. There was very clearly a serious, widespread
problem with sustainability in a number of dimensions, environmental
sustainability, but also financial, institutional, social and
political, all kinds of dimensions to this issue of sustainability.
People have worked very hard to say, "Well, how do we respond
to that record of experience and how do we better amend our procedures
and the design of our interventions to cope with this?" I
think it is a two word phrase which is certainly heard probably
a dozen times a day in DFID.
(Dr Reynolds) I would agree that continuous pressure
is needed to ensure that the broad statements are actually implemented
in practice. In relation to the Amsterdam Treaty commitment which
Alan mentioned, the Luxembourg European Council in December last
year asked the Commission to produce a strategy to implement integration
within the Community. The Commission, last month in May, published
a communication setting out guidelines for integrating environment
into other policies. The key point there is that all new policies
should be subject to environmental assessment and also the various
sectoral councils, energy and so on, should produce strategies
for integrating the environment into their work. The presidency
has put this issue on the agenda for the coming Cardiff European
Council so there will be a response from the Council. I cannot
say at the moment what that will be. It is still under discussion,
but the process is being taken forward with some momentum.
162. That leads me to my next question.
In your booklet, A New Strategy, on page 15 at the top, you say,
"Increased attention to the environment ..... will mean increasing
the share of our resources devoted to it." My first question
is: is this actually happening and, secondly, to what extent would
this increased share, if it is an increased share, be channelled
through the EU?
(Mr Coverdale) It is happening. I suppose most
conspicuously, it happens in our own bilateral Knowhow Fund. Already,
increased resources are flowing into specifically environmental
projects. In the past, we limited our involvement in environmental
projects I think entirely to the money available from the Environment
Knowhow Fund. We are now supplementing the resources available
from the Environment Knowhow Fund, which is the money we receive
from DETR, with the resources from the Knowhow Fund programmes
which DFID commands. We are preparing country strategies at the
moment for the scrutiny of our ministers to explain the priorities
within countries, which is an exercise really in mapping the strategy
in that booklet onto the individual countries. We are furthest
forward with our Russia strategy paper and that will recommend
increased attention to environment projects. Indeed, we had a
very helpful strategy mission two or three months ago, which was
a joint mission between DFID and DETR, which was very helpful
in helping us to identify our priorities in Russia in this area.
We have also negotiated within DFID increased staff resources
for this area of work, increased time from our environment adviser.
I think the increased resources which DFID would like to make
available for environment projects would be channelled bilaterally.
We would look to influence the European Commission to allocate
an appropriate share of its own resources to environment projects
and the mechanism for doing that is through the negotiation of
the new TACIS regulation. That process will take place next year.
163. When you talk about increasing the
share for the environmental objective, one is bound to ask whether
the other objectives which you set out on page six of your bookleteconomic
growth, inclusive approach to economic management, access to right
skills, security of information, deepening integration into the
international communitywill get proportionately fewer resources?
(Mr Coverdale) Yes, it must. The flavour of our
approach has been that there is a great deal worthwhile in what
the Knowhow Fund has done traditionally and we do not want to
sweep that away in terms of the experience, the knowledge and
the influence we have in those important areas. We are keen to
increase our involvement in the social aspects of the transition
and in the environmental aspects of the transition. Yes, the shares
will alter but on a country by country basis, recognising that
some countries are further on in the transition and have different
needs to others which are further back.
Lord Ponsonby of Shulbrede
164. I wanted to ask another supplementary
to this point. There is another question later on where we ask
whether the funding is demand led and what I really wanted to
ask was whether the recipient countries share this will to concentrate
greater resources on environmental measures. Certainly in my experience
of the former Soviet Union, there was some scepticism about that
and they really wanted to devote the resources available to generating
economic growth. To be honest, I have heard expressed to me once
or twice some resentment that they were being forced down routes
that would not necessarily be their first choice.
(Mr Coverdale) Under the bilateral Knowhow Fund,
we are not so constrained by that because it is not an official,
government to government programme which is agreed centrally with
the Russian government. We have informal exchanges with them and
we share our objectives. They are comfortable with the strategy
we are outlining for Russia at present. For TACIS, I think the
importance of the regulation is to clear the minds of the European
Union as to what they want to do with this vehicle, with this
instrument. That becomes a basis for the discussion with the individual
countries about what are the appropriate indicative programmes.
It is important that the Union clears its mind on its own priorities
and what it wants to do with this instrument before it enters
into discussions to agree those indicative programmes which essentially
will be a matter of finding common ground between what the Union
wants to do with TACIS and what the partner country would like
to do with this assistance.
165. You have not really answered my question.
I am sure the partner countries will want to get as many resources
in whatever form they can but my question was whether there is
a demand from the partner countries that there is an increased
emphasis on environmental matters.
(Dr Reynolds) I would agree that there is a real
issue here. Although the position varies from country to country
within the NIS and also from municipality to municipality within
the NIS, there is an issue of convincing decision makers there
that there is not a sharp conflict between environmental improvement
and economic growth. In many cases, these two go hand in hand
because you are talking about, for example, reducing energy costs,
reducing energy usage, which has economic benefits and environmental
benefits. You are talking about economic growth in a way that
is going to be sustainable and is not simply going to lead to
problems in five or ten years' time, which will be very expensive
to solve. The two go hand in hand. A lot of the activity that
we are conducting under the Environment for Europe process is
really directed at persuading and encouraging the governments
there to understand this message, and also to improve public awareness
so that there is increasing public pressure on those governments
to raise environmental standards. In a sense, I would agree with
you but this issue is being addressed as much as we can already.
166. I know this is not strictly TACIS;
it is more PHARE, but if you read Agenda 2000 the one thing in
common with everyone from central Europe who wants to come into
the Common Market is in fact environmental problems, is it not?
I certainly get the impression that it has got through to them
from various people we have met from Hungary, Poland and the Czech
Republic. They are aware of the fact that one of the bars to them
joining the Common Market is their environmental problem. Do you
feel it has got through to the central European countries more
than it has got through to, say, the TACIS countries?
(Dr Reynolds) Again, I think I would agree that
the factor of EU enlargement is a tremendous pressure on the accession
countries to improve their environmental performance, because
they are required to approximate their laws to the EU environmental
directives, so there is that huge pressure on them. That is already
producing results. They are taking it very, very seriously. In
the NIS countries, that pressure is not there, although it is
the case that in a number of NIS countries there is a great deal
of interest in adapting their standards to EU standards. For example,
in the Ukraine, they are looking already to EU standards, so there
is a certain pressure there also, but clearly not as great.
167. The worry that Lord Ponsonby has expressed
about priorities is backed up by what you say in paragraph 10.2
in your memorandum. The perception in the NIS is that social needs
of large groups of people are not being met and people have more
on their minds than the environment. Would you agree?
(Mr Coverdale) Yes, that is certainly right.
168. Could I suggest there that, if one
talked about health rather than environment, it might actually
be more convincing for them? If one is talking about air pollution
or water pollution, one is actually talking about the population's
health. The word "environment" in a way sounds as though
it is about small, furry animals whereas, if one actually casts
it in terms of the health of the population, are not people more
convinced? I do not know what the Russian for "environment"
is but it may be that the concept is rather diffuse and woolly
whereas, if one is actually talking about people and how it is
affecting the health of their children and so on, it might be
(Mr Coverdale) Yes, we are comfortable with that.
169. One of our interests here obviously
is the effective use of public funds, whether they be from EU
sources or from UK government sources, from various departments.
We have an interest in coordination between the UK fund, the Environment
Knowhow Fund, bilateral assistance from other Member States and
TACIS. Would you like to lead us into that perhaps with some examples
of recent activities which would indicate that there is indeed
a coherent relationship between the various funding programmes?
(Dr Reynolds) Alan has already explained a little
bit about the role of the Environment Knowhow Fund and also the
Knowhow Fund, because we are increasingly melding them together.
I would just add I think a little bit to say that, in our bilateral
activity, we concentrate particularly on areas like policy reform,
building up institution capacity, drawing on the UK skills base
in order to do that. We are not providing investment capital finance,
but we do work with the international financial institutions particularly
where they are considering loans and we can make a contribution
in terms of project preparation or training or building up the
capacity of the borrowers. Just to give a very brief illustration
of the sort of projects we are doing, we are supporting a large
project in St Petersburg, working with the water company there,
the Vodokanal. We have already provided support for a water development
plan which the EBRD is coordinating together with I think about
six other Member States. It is a very big, multidonor project,
but we have played a key role in helping to manage this project.
That stage is completed and we are now moving on to a second stage,
working again with the EBRD on a corporate development programme.
This is all about building up the local Vodokanal so that they
can use the lending which the EBRD will provide. That is one big
project that we are doing.
Lord Mackie of Benshie
170. How long has that taken to get off
(Dr Reynolds) The first part is completed and
it has led to a loan from the EBRD.
171. We are visiting it next week.
(Dr Reynolds) The second part is over a period
of about three years and that will be starting shortly. At the
opposite end of the scale, we have also recently assisted the
Moldovan Ministry of Environment by helping with training on project
preparation. This was an instance where we actually worked with
the local TACIS office. They got in touch with us and asked us
for some help. We provided some materials that we had produced
and translated them and this cost virtually nothing, but it trained
20 people in project preparation. I will move on to the second
part of your question which is about the relationship with TACIS.
I think the main point to emphasise is that we work within the
framework of Environment for Europe, which involves the EU Member
States, the countries of central Europe and the NIS, the international
financing institutions and the European Commission programmes.
There are two particular bodies active under that process. One
is the Project Preparation Committee and the other is known as
the Environmental Action Programme Task Force. The Project Preparation
Committee deals particularly with investment. It is an informal
network amongst the bilateral donor countries, the banks and the
EU to coordinate our activity in an informal way and to matchmake
between different funding sources. That is investment primarily,
but we are involved in that by providing technical assistance
in support of investment. The other body, the task force, is more
concerned with institutional development, policy reform. Again,
it is a fairly informal network which is designed both to ensure
good communication between the different donors but also to share
experience. I think, on the environmental side, there is actually
quite a good network in place to ensure good coordination.
172. To what extent is there a genuine sharing
of experience here involving the recipient countries and the partnership
countries as well as the European Union countries?
(Dr Reynolds) I think the key body here is the
task force which involves all the countries of the region. It
involves the NIS countries. They are quite active participants,
in fact, and increasingly active. The secretariat for the task
force is provided by the OECD and I think one of their strengths
is that they are very good at analysing common problems and coming
forward with good practices and spreading this information. I
think that is actually working very effectively at the moment.
Certainly amongst the environmental community, and to some extent
the aid community who are also involved, those networks do exist.
173. The problem is that they are informal
networks, are there not? Is there a case for having some sort
of common database of projects that are going on in eastern Europe
and the old Soviet Union? I mean just one which can log what they
are doing. With modern computers, I would have thought it would
be quite easy to have some sort of record.
(Dr Reynolds) My view would be that the informal
network works better. A lot of attempts have been made to set
up databases. It is an additional burden to provide the data when
it is needed and often databases tend to be a historical record
of projects rather than what is really happening at the moment.
174. It is a problem about all the countries
having bilateral aid systems. I do not know whether all the countries
in Europe do but if they all have something like the Knowhow Fund
the whole informal network is likely to break down, it seems to
(Dr Reynolds) The advantage of an informal network
is you know who the people are and you can phone them up and say,
"We are thinking of doing a project in such and such a country.
Are you already active there?" We know Helen Holm very well,
for example, and we can contact her directly on an informal basis.
175. A network works as long as it is not
(Dr Reynolds) Yes.
Lord Hughes of Woodside
176. Have you seen the evidence we have
received from the EBRD, the local authorities and Commission DGIA?
(Mr Coverdale) Yes.
177. There are two ends of the spectrum,
if you like. The EBRD expressed some concern, as I recall, about
follow-up finance and how that would be coordinated. The local
authorities were very enthusiastic. Have you any comments to make
on the evidence we have from these bodies? The DGIA one was a
bit technical for me. I do not know about anyone else.
(Mr Coverdale) We read the evidence with interest.
The evidence given especially by EBRD echoed much of our own thinking,
for example, on lengthy TACIS procedures and the like. We did
not have any other specific comments on the evidence you have
178. Leading on from that, as we have been
reminded, the 1996 TACIS regulations were the first which identified
the environment as a priority. What mechanisms actually exist
to ensure that environmental activities get a fair share of the
TACIS budget? In other words, how are the TACIS priorities determined?
You have said that in the presidency you have tried to push the
environment forward in all these programmes but how also does
one strike a balance between nuclear safety and other environmental
needs, especially since, if you look at the deterioration in the
environment in the TACIS countries, it seems to be deteriorating
faster rather than improving at all.
(Mr Coverdale) As I said earlier, the TACIS regulation
is really the first step which hopefully clears the minds of the
European Union as to what it wants to do. Then that is the background
to discussion of indicative programmes with the countries involved,
the demand led approach that we will no doubt come on to. Those
indicative programmes then come back to the management committee
for scrutiny and approval, upon which we sit, and then the indicative
programmes themselves are translated into annual action programmes
for Russia and the Ukraine and biannual for the other NIS countries,
I think. Those action programmes too come back to the management
committee. It is done on a country by country basis in the light
of those discussions and I suppose we have to take a view as to
whether the spirit of the regulation and what has been agreed
in the regulation is being honoured in the indicative programmes
and in the country programmes which come out. There is not, I
think, a clear mechanism in particular for striking a balance
between nuclear safety and other environmental needs. Specific
decisions were taken on allocations for nuclear safety at a political
level in response to specific nuclear-related needs. In particular,
one thinks of Chernobyl. That has taken quite a significant share
of the TACIS programme, or indeed a large share of the money which
is being spent on the environment.
179. What you have described is a mechanism
for the TACIS programme, but if I am rightand if I am wrong
I am sure you will tell methere is not actually a mechanism
to ensure that environmental activities get a fair share of the
TACIS budget. It really depends on the alertness or the awareness
of the different people of different countries who deal with it
at different stages.
(Mr Coverdale) I think we have taken the view,
in negotiating the regulations, that, while we are only one voice
amongst many, to too clearly specify percentage shares or stipulate
percentage shares will put the Commission in something of a straitjacket
in its negotiations. There has to be a demand led aspect to this
process. There has to be local ownership of the programmes and
they have to respond to that country's needs.
(Mr Lowcock) It is indeed the case that there
is no specific allocation, either in terms of a fixed sum of money
or a proportion of the TACIS overall resources which are allocated
for any one sector, whether it be environment or another sector.
That is an approach which reflects the practice not just in TACIS
but in, I would say, many development agencies, bilateral and
multilateral. The point about flexibility, about not being constrained
by saying from the outset that X per cent will go to sector A,
Y per cent to sector B and Z per cent to sector C, is one which
arises from the experience that development agencies over the
last three or four decades have had in discussion with partner
governments, recipient governments, about how flexibly to respond
to needs as they evolve.