(a)  We note that funds for pre-accession aid are attributed to DFID's budget. We are obviously concerned that official aid provided by DFID, bilaterally and multilaterally, to pre-accession countries be genuinely poverty focussed development. We ask DFID in its response to explain how both its own and the EC's programmes in pre-accession countries contribute to the elimination of poverty. We will return to this subject in the future (paragraph 9).

(b)  We welcome progress made in the reorganisation of the Commission which has seen the number of Commissioners concerned with development cut from four to two. We do not, however, regard this arrangement as being fully satisfactory or final. The ultimate goal of the EC must be the creation of a single DG, headed by a single Commissioner with exclusive responsibility for expenditure in all developing countries (paragraph 13).

(c)  EC external assistance policies are clearly determined more by political priorities than poverty alleviation. Pre-accession aid and the stability of the regions surrounding the EU are indeed important political objectives, but it is vital that they do not interfere with or detract from developmental objectives. The aims of the Statement on Development Policy are unlikely to be achieved in the absence of a dedicated development budget which would enable outcomes to be audited against developmental objectives. At present, development funds are drawn from a budget which also covers expenditure on external action. All too often Category 4, initially envisaged as a source of finance for community development programmes, is 'raided' by the Council of Ministers to fund political initiatives that they do not wish to fund bilaterally, amounting to what Clare Short described as 'political gestures'. Any failure in poverty focus can simply be explained away as 'external action' rather than 'development'. For the Statement on Development Policy to be effective there must be a budget for expenditure in all developing countries dedicated to its principles. We therefore recommend the establishment of a single development budget category, with the sole aim of poverty reduction and the delivery of aid in line with the Statement on Development Policy (paragraph 18).

(d)  Whilst we welcome the rationalisation of the Commission, the present geographical division cannot make for good development policy. The fact that responsibility for Asia — which contains half of the world's poor — remains outside DG Development is inexplicable. We again recommend that all developing countries be brought within the compass of DG Development (paragraph 19).

(e)  At the outset, we welcome the production of a clear statement of the developmental aims and objectives of the EC as an important first step towards improving the accountability, poverty focus and effectiveness of EC development assistance (paragraph 23).

(f)  We welcome the new Commission's commitment to poverty reduction as the overarching objective of its development policy, and its analysis of the definition of poverty which encompasses other aspects in addition to income levels (paragraph 26).

(g)  It is of course true that a significant number of the world's poor live in Middle Income Countries. However, we agree with the Secretary of State that the large-scale transfer of resources is not the most appropriate way to tackle inequality in such countries. Further consideration is required of the means by which inequality in Middle-Income Countries should best be addressed. We are concerned that existing proposals for three distinct poverty focusses may well be an attempt to maintain the status quo and to ring-fence resources for Middle-Income Countries. This suspicion is made all the greater by the fact that the proposals are immediately followed by the statement that "improving the primary poverty focus is clearly limited by the setting of the political priorities and the consequences for the distribution of the financial resources to the regions". To have three focusses is, simply, to be unfocussed. The proposals for primary, secondary and tertiary poverty focusses are at best useless and at worst dangerous. We recommend that the Commission's development strategy should be predicated on a single focus — the elimination of poverty — against which all development programming and implementation is audited and judged. This would undoubtedly result in a reallocation of resources from political priorities (in particular from MEDA and programmes for the Balkans and the New Independent States) to developmental priorities in low income countries (paragraph 32).

(h)  The Statement on Development Policy represents a significant first step towards a more coherent and poverty focussed EC development programme. The UK Government must now press for further amendments to the Statement to remove the caveats and escape clauses which detract from its poverty focus. The Statement should not be endorsed until its commitment to poverty eradication is unequivocal (paragraph 33).

(i)  We welcome the analysis, contained within the Statement on Development Policy, of the role of the EC in relation to other donors and in respect of its own strengths and weaknesses. This must be accompanied by a more explicit analysis of how the six core areas contribute to poverty reduction and the attainment of the international development targets, and how they relate to the Integrated Framework for Community Activities. The Government should now press the Commission to draw up an action plan, with clear deadlines, for the scrapping of planned projects incompatible with the core functions identified in the Statement on Development Policy and for the necessary refocusing of staffing and management structures. We further recommend that the UK press for an agreement by all Member States that during their respective Presidencies of the EU, they will pursue policies which are coherent with the core development policy areas which have been agreed within the Statement. We also urge the European Parliament, and its Development and Cooperation Committee, to ensure that no additional budget lines are approved which fall outside the six core areas set out in the Statement on Development Policy (paragraph 36).

(j)  We welcome the Commission's statement of intent that the impact of Community policies on developing countries should be considered throughout the Commission but are concerned about how this will be implemented in practice. We recommend that all EC DGs should sign up to the Statement on Development Policy. We consider the Commission's proposed Annual Report on Development to be a useful occasion for the Commission to report each year on progress towards coherence across the Commission on developmental issues (paragraph 38).

(k)  We welcome the proposals in the Statement on Development Policy that the EC should be prepared to supplement the funding of the bilateral programmes of Member States a proposal which, if adopted, could go some way to eliminating backlogs in EC expenditure. Such proposals have, however, been around for some time. We recommend clear targets for the implementation of this policy proposal. We also request details of existing programmes where the EC is co-funding the development programmes of Member States (paragraph 40).

(l)  We congratulate the Commission on the imaginative use of underspends to support the HIPC Initiative (paragraph 47).

(m)  The level of existing backlogs is untenable. It cannot make for good practice to have an average of four and a half years between commitments and disbursement. It damages the reputation of the Community and will have severe implications for implementing partners. We support the proposal by the Commission to examine dormant commitments with a view to rescinding them. We recommend that the Commission propose a clear timetable for the realisation of this objective. It is better to close dormant commitments and not draw down funds from Member States than simply to have the money spent by the EC quickly and badly (paragraph 50).

(n)  We further note the problems that NGOs are having with the EC in getting paid on time. We recommend a payment code of conduct for the EC, introducing penalty payments if the original amount contracted is not paid within the period agreed (paragraph 51).

(o)  It has become very clear — both during Committee inquiries and from evaluations of ECHO — that ECHO suffers from exactly the same problems of poor administration, delayed disbursement and staffing as other parts of the Commission. During our recent visit to Brussels and when examining ECHO's own website we have been unable to discern any clear and transparent information on how and where ECHO is spending its money. This is clearly unacceptable. We recommend that DFID request details of amounts committed and disbursed by ECHO, with all relevant dates, in: Mozambique after the recent floods; Central America in the wake of Hurricane Mitch; Kosovo; and Ethiopia during the recent emergency, and then report to the Committee. We also recommend that ECHO, as a matter of urgency, reform its procedures so as to provide prompt, clear and comprehensive information on its activities (paragraph 53).

(p)  The Committee looks forward to the production of a strategy review of ECHO's approach to crisis situations. We trust that proposals contained therein will contribute to the speedy delivery of goods and services to crisis zones (paragraph 54).

(q)  We congratulate the SCR on its achievements to date in rationalising procedures. We welcome the proposals by the Commission to expand the role of the SCR, and in so doing to reunify the bulk of the project cycle. We also welcome the establishment of a Quality Support Group which we see as acting as a bridge between programming and evaluation (paragraph 59).

(r)  We recommend that the SCR should explicitly endorse, and be committed to, the principles enshrined in the Statement on Development Policy. Details of how the new, expanded, SCR would operate in practice were sketchy at the time of the Committee's visit to Brussels. We look forward to being provided with further details as soon as they are available. We wish to know the DG to which SCR officials in the field will report — DG Development or DG External Relations. For example, would an SCR official in Morocco be seeking to identify projects on the basis of the framework set out in the Statement on Development Policy or according to political priorities such as the stabilisation of the near abroad? (paragraph 61).

(s)  We recommend that the Government provide us with details of the likely impact of the Commission's proposals for changes in human resources and for amending the financial regulation on the management of external assistance (paragraph 63).

(t)  Whilst the Committee has no objection in principle to the use of contractors to implement EC programmes, we support the Commission's conclusion that a workable, more cost-effective alternative to the TAOs is urgently required (paragraph 64).

(u)  The Committee has repeatedly heard — from NGOs and Commission officials — that the Commission simply does not have enough staff to cope with the vastly increased sums that it is required to spend and the increased financial controls that have been imposed on it as a result of fraud allegations. Any reassessment of staffing in DGs Development and External Relations, however, must first take account of the proposals to rescind dormant commitments and of changes in staffing requirements as a result of Commission proposals to concentrate on six core areas. Only then should the issue of staffing be addressed. We look forward to the conclusions of the Peer Review on staffing in the Commission, subject to the conditions set out above (paragraph 69).

(v)  The Member States and the Commission appear to have reached an impasse on the issue of micromanagement with the Commission keen to change the emphasis from detailed management before project implementation to evaluation during and after completion of the project. Member States are reluctant to relinquish control until there has been some discernable improvement in the Commission's own evaluation of development assistance. Member States and the Commission should seek to agree, at the earliest opportunity, an overall policy framework for EC development assistance and an action plan for its implementation. Once such a policy has been agreed and as soon as suitable accounting mechanisms have been put in place Member States should seek to reduce their day-to-day involvement in the management of Commission-run development projects (paragraph 71).

(w)  A great deal has changed in the European Commission since the last time the Committee examined this issue. The financial perspectives for the period 2000-2006 have been agreed, the resignation of the Santer Commission has led to Commission reform. The new Commission is in the process of re-examining its management procedures, and a number of proposals have been made for the reform of external assistance. Further changes are afoot. However, if the EC is to realise the its own objectives of improving the management of its external assistance a number of additional reforms will be required both on the part of the Commission and on the part of Member States. The momentum of recent change must be maintained. This will require nothing less than a comprehensive action plan for the reform of EC development assistance, endorsed by the Commission and Member States, with clear commitments and a timetable for their implementation. To this end, we recommend an extraordinary meeting of the Development Council focussed entirely on the reform of the EC's development budget and programme (paragraph 72).

(x)  None of the issues raised in this Report are new. We are exasperated with the failure of the Commission to reform its development activity effectively. We have no doubt that were the development reforms we outline implemented, the EC could make a real difference to the elimination of poverty. The EC is living on borrowed time — the Commission should give up its addiction to half-measures and have the courage to reform for the benefit of the world's poor (paragraph 74).