Memorandum submitted by the Department for International Development

Written answers responding to questions from the International Development Committee

Poverty-focus and low-income countries

1.1. The Committee raised the issue of the poverty-focus of European aid in its report on DFID's 2004 annual report. We were told at the time that the principle of making poverty reduction and the MDGs the main focus of all EC development programmes was enshrined in the draft Constitutional Treaty and that the arrival of the Union Foreign Minister after ratification of the Treaty could pave the way for further institutional reform leading to a better means of managing EC aid.[1] What impact have the problems subsequently encountered in ratification of the Treaty had on progress in this area?

Under the UK Presidency, 25 Member States, the European Commission and the European Parliament agreed a new Development Policy statement entitled "The European Consensus on Development" setting out the EU's common vision on development and how this would be implemented at the Community level. Poverty reduction and achievement of the Millennium Development Goals (MDGs) are its main aims. The UK Government continues to argue that poverty reduction and achievement of the MDGs should be the overarching purpose of the Development Cooperation and Economic Cooperation Instrument (DCECI) (one of the new external instruments proposed as part of the next Financial Perspective), currently under negotiation. In its capacity as EU Presidency, the UK Government introduced a redraft of the Luxembourg text on the DCECI, which calls for poverty reduction and the achievement of the MDGs to be the main objectives for all Community spend in countries covered by the instrument.

Institutional and management reforms are important elements of improving the effectiveness of Community aid. The appointment of a European Foreign Minister, as envisaged in the Constitutional Treaty, was to have triggered a series of institutional reforms with a direct bearing on the management of Community aid. In the absence of a European Foreign Minister, there are no alternative plans for such reforms. But the UK is arguing that the Commission's programme of management reforms launched in 2000 (now completed) should be taken further. At the November 2005 General Affairs and External Relations Council meeting, a debate took place among Development Ministers on how to improve the overall effectiveness of European aid and the conclusions are attached[2].

2.2. The Department makes reference in the annual report to the EC's Financial Perspective negotiations, suggesting that they offer the opportunity for reform of EC aid allocation (p88). The talks are set to be ongoing throughout 2005. Can you provide us with an update, with particular reference to the likely success of the UK Government in achieving its aim of producing a simplified budget structure and a transparent resource allocation system, and of the prospects of DFID securing future financing for the Peace Facility for Africa?

The UK Government is committed to working towards an agreement on the Financial Perspectives by December. On this timetable, finalising the details within each budget heading (including the Global Partner or external actions) will fall to the Austrian Presidency in January 2006. Discussion of the individual instrument regulations proposed under the Financial Perspectives has continued, albeit at an uneven pace. The European Commission has proposed a simplified and rationalised instrument structure, which we fully support. This requires the joint agreement of the European Parliament and the Council.

The introduction of transparent and objective resource allocation criteria for each of the three geographical instruments (Development, Neighbourhood, Pre-Accession) remains a core aim. The principle has largely been accepted, but the Commission has not yet presented its proposals to Member States for discussion. We will urge the Commission to open a dialogue with Member States on its proposed criteria and approach to allocating resources.

We expect all Member States to agree that the Peace Facility for Africa should be supported beyond its current financing period of end-2006. As Presidency, we have opened discussions on a range of possible financing options.

3.3. In response to a recommendation from the Committee last year,[3] the Department has produced a table in this year's report detailing the poverty focus of multilateral agencies (Box 5b, p87). Other than the European Community, does the Department have any plans to try to increase or maintain the poverty focus of any of the agencies listed?

The United Nations system: through our representation on the governing boards of UN agencies, we are pressing for enhanced focus in their programmes, including a greater share of resources for poorer developing countries. However, the UN has a global mandate and an important part of this is the support provided by the UN to governments of middle income countries to address the needs of the marginalised poor.

The World Bank and Regional Development Banks: DFID core contributions to the World Bank and the African, Asian, Inter-American and Caribbean Development Banks are targeted exclusively at their concessional arms (International Development Association, Asian Development Fund, African Development Fund, and the CDB's Special Development Fund). These focus on the poorer countries in each region. In 2004 and 2005, DFID committed £141m to AsDB's ADF-IX, £1.43 billion to IDA-14, £206m to AfDB's ADF-X and up to $44m to CDB's SDF-6. In 2005, we also committed £200m to the World Bank's new Africa Catalytic Fund, which will concentrate on funding programmes addressing the hard-to-reach Millennium Development Goals, such as reducing maternal and infant mortality, improving access to water and sanitation, and increasing girls' education. DFID also committed £12m to the IADB's Multilateral Investment Fund, the great majority of which goes to the poorest Latin American countries, and the poorer regions within the middle income countries.

The humanitarian system: by definition the people these agencies aim to assist in the aftermath of conflicts and natural disasters are, at least temporarily, desperately poor.

4.4. The report provides details of DFID expenditure on consultancy contracts (p167). Does the Department have similar figures showing the proportion of spending by the various multilateral agencies accounted for by consultants? Do such figures form an input of the Multilateral Effectiveness Framework (Box 5e, p91)?

DFID does not hold data on the proportion of spending by the various multilateral agencies accounted for by consultants, and their spend on consultants did not form an input into the Multilateral Effectiveness Framework. The framework focuses on the way that the multilaterals are organising themselves to improve their internal performance, their focus on country level results and their relations with governments and other international organisations, and does not consider the breakdown of agency spending or financing.

5.5. With respect to the fourteenth replenishment of the International Development Association (IDA14), the Department mentions in the report that the UK's basic pledge was £1.43 billion, with some of these resources being specifically linked to progress by the World Bank in working more effectively with other donors and in reforming the way it attaches conditions to its aid (p92). Can you put a figure on the proportion of the pledge which was so linked? What progress has the World Bank made in these areas so far?

£100 million of the basic pledge was linked to the World Bank working more effectively with donors and reforming the way it attaches conditions to its aid. Specific indicators of performance are set out in the Bank's report "Additions to IDA Resources: Fourteenth Replenishment - Working Together to Achieve the Millennium Development Goals".

The World Bank has completed its conditionality review. Its report and the supporting papers have been published, and are available on the World Bank website. The findings and recommendations of the review were discussed at the Bank Board in September 2005, and the proposed five best practice principles proposed by the review were endorsed by Governors at the Annual Meetings of the World Bank. We will continue working closely with the Bank to ensure that the recommendations from the review are implemented effectively. At the Annual Meetings, it was also agreed that a progress report will be produced next year.

Since the conclusion of the IDA 14 replenishment, the Bank has adopted the indicators from the Paris declaration on harmonisation. The Bank has agreed to monitor their performance against these indicators, to ensure that it is becoming more effective on the ground in working with other donors.

Payment of the £100 million will be made in two equal instalments of £50 million. Subject to satisfactory progress, the first instalment will be paid after Parliament has approved the draft Statutory Order for the IDA 14 replenishment and the Instrument of Commitment has been deposited with the Bank. Payment of the second instalment will be considered after the IDA 14 Mid-Term Review at the end of 2006.

6.6. The Department claims that it is active in examining how the IMF's role in low-income countries should evolve, and points to a meeting of the IMF and donors in London in September 2004 which resulted in a follow-up paper by DFID and HMT (p93). What was the reaction of the IMF and donors to this event and the follow-up paper?

The IMF produced a paper on its signalling role, proposing a new non-financial facility and procedures to fill information gaps with Assessment Letters[4]. The paper detailed how the proposed non-financial facility - the Policy Support Instrument (PSI) - could operate. The PSI could prove a valuable addition to the facilities through which the IMF assists low income members that do not have a need or desire for IMF financial support, but seek IMF endorsement of their policies. The IMF Board discussed the paper in July 2005 and welcomed the proposals, which received further support at the Annual Meetings in September. The proposals were formally approved by the IMF Board in October. Nigeria was the first country to adopt the new PSI in October, providing the basis for debt relief from the Paris Club group of creditors.

Debt relief

7.7. The Department notes in the annual report that: "There is good evidence that debt relief is helping the poor... Nonetheless, progress with HIPC is slower than had been hoped. Several countries have so far been unable to complete the key reforms necessary to ensure that money saved from debt relief is used to benefit the poor" (p98). Can you provide a list of these countries and explanations for these difficulties?

To date, 18 countries have successfully reached Completion Point (CP) of the HIPC initiative and received irrevocable debt relief. They are: Benin, Bolivia, Burkina Faso, Ethiopia, Guyana, Ghana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia.

Another 10 countries have successfully reached HIPC Decision Point (DP), the intermediate stage in the HIPC process at which relief is delivered on debt service payments. They are: Burundi, Cameroon, Chad, Democratic Republic of Congo (DRC), Gambia, Guinea, Guinea Bissau, Malawi, Sao Tome & Principe, and Sierra Leone.

Some of these countries have made slower than expected progress in moving from Decision Point through to Completion Point (when they receive irrevocable debt stock write-off). The reasons for slow progress include civil conflict, macroeconomic instability^[5], and delays in implementing a poverty reduction strategy paper (PRSP). The table below summarises the main causes of delays for those countries that reached Decision Point more than a year ago.

A further 10 countries have qualified for the HIPC initiative but have not yet reached Decision Point. They are: Republic of Congo, Cote d'Ivoire, Central African Republic, Comoros, Lao, Liberia, Myanmar, Sudan, Togo, and Somalia. These countries' slow progress has again been due to serious governance and human rights concerns, although some are now on course to reach Decision Point within two years subject to implementing agreed reforms. Each country's progress is summarised in the table below.

In addition to the 38 countries listed above, several countries could qualify for HIPC under the extended sunset clause (the end date of the Initiative). The final list of eligible countries will be finalised early in 2006.

The UK is committed to helping countries that are committed to poverty reduction to progress through the HIPC initiative. We provide assistance in a number of ways including:

·· Technical assistance to help improve capacity in debt management and analysis under the HIPC Capacity Building Project

·· In-country support for critical policy reforms, particularly in the areas of financial accountability and governance

·· Support to the PRSP planning processes, including outreach to civil society groups

Where countries have not been able to implement the complete set of reforms necessary to qualify for HIPC debt relief, but have made good progress in areas that are critical for poverty reduction, the Boards of the IMF and World Bank may decide waivers are justified. This could mean that a country could progress through the HIPC initiative even if not all formal conditions have been met. Zambia, for example, reached Completion Point in 2005 having been granted three waivers on difficult-to-meet policy conditions by the Boards of the IMF and World Bank.

Humanitarian emergencies

8.8. After reading last year's annual report, the Committee asked the Department for further explanation of the changes made to the way that DFID allocates funds for humanitarian emergencies and to be kept informed of the impact of these changes.[6] What impact have the changes had on the Department's ability to respond to the recent crisis in Niger?

DFID revised its approach to funding for humanitarian emergencies from the financial year 2005/06 due to consistently high levels of spending on humanitarian assistance over recent years and increased pressures on the Contingency Reserve. It was decided that budget planning should seek to reflect historical spending levels. For the period 2005/06-2007/08, DFID has allocated funds to the Conflict and Humanitarian Affairs Department (now known as the Conflict, Humanitarian and Security Department - CHASE) that include funds for responding to natural disasters and to humanitarian emergencies outside Africa. This is then supplemented by an additional amount (£30m in 2005/06) that is held in DFID's Contingency Reserve, but is ring-fenced for CHASE to respond to further humanitarian need during the year if required. This would streamline management responses to provide funds for rapid onset responses during the year. This has worked well in 2005/06, enabling a rapid and significant response to the Pakistan earthquake. DFID still retains its scope to supplement these funds from its Contingency Reserve in exceptional cases, as for example in its response to the tsunami disaster. Funds for Niger and other African emergencies are handled separately to CHASE funding.

In Africa, provision is made in country aid frameworks for humanitarian expenditure in those countries that have shown a persistent need for assistance of this kind. This accounts for the majority of DFID humanitarian expenditure in Africa and is allocated on the advice of DFID humanitarian advisers working in country and in the Africa Conflict and Humanitarian Unit (ACHU). These allocations are supplemented by a divisional humanitarian reserve, held by the Africa Director and disbursed on the advice of ACHU. The reserve in the current financial year stands at £25m and it is expected that this will be fully spent. The reserve enables DFID to respond to humanitarian crises in Africa arising from conflict, drought or other man-made shocks in countries where we do not have an existing country programme, or where humanitarian needs exceed the initial provision made through country aid frameworks. ACHU's humanitarian advisors are tasked with crisis monitoring across Africa, undertaking field assessments, assisting in the design of response strategies, appraising grant applications, and monitoring the impact of humanitarian response.

DFID's response to the crisis in Niger was handled by ACHU, in close collaboration with West Africa Department. Close monitoring of the situation in the Sahel enabled DFID to make an early response to the locust invasions of 2004, to monitor and appraise the subsequent early-warning information coming out of the region relating to food-insecurity, to identify conclusive evidence of imminent crisis, to liaise with operational partners, to assess the situation on the ground in Niger, Mali and Burkina Faso, and to design a response strategy. Africa Division's Humanitarian Reserve was then utilised to supplement available funds on the West Africa regional budget line, and to deliver nearly £4 million of humanitarian assistance, through partners, to the Sahel. The ongoing surveillance and assessment work undertaken by ACHU, and the presence of Africa Division's Humanitarian Reserve, enabled DFID to be one of the first donors to respond to the food crisis in Niger, with most of our contribution being made ahead of the media attention that prompted a wider response by the international community.

9.9. The Department has said that it responds to humanitarian crises, but at the same time looks for ways to break the cycle of emergencies and tackle longer-term problems. Reference is made to DFID support in Ethiopia along these lines (p124). Is it your assessment that similar assistance will be required in Niger? If so, how will this affect expenditure on programmes in other countries?

DFID's analysis is that this year's food crisis in Niger had its roots in the country's deep poverty and other chronic, structural and cultural factors. Shortages of food and high cereal prices resulting from the drought and locust invasion were the "straw that broke the camel's back". There is no question that, beyond the humanitarian response, more needs to be done to tackle these longer-term issues. DFID is currently assessing the options available for strengthening long-term food security in the Sahel, both in terms of the direct contributions that could be made by the UK and the wider work that might be done by bilateral donors and multilateral agencies with country programmes in Niger. We would expect any additional DFID funds devoted to food security in Niger and the Sahel to be drawn from the rising aid framework, and not to be deducted from other programmes in Africa.

10.10. The annual report discusses the Department's role in the establishment of the Good Humanitarian Donorship (GHD) initiative, which is designed to improve the effectiveness and efficiency of humanitarian aid (p106). Have you made any assessment yet of the effectiveness and efficiency of the aid provided in relation to Niger? Was any GHD research used to inform aid-distribution decisions in Niger?

DFID has already taken steps to evaluate the effectiveness and efficiency of humanitarian aid delivered to Niger, as well as to understand the nature of the crisis and the reasons for the delays in the national and international response. Three separate DFID humanitarian assessment missions were undertaken in the Sahel region between July and October 2005. The first of these looked specifically at the response strategies in place, and worked with partners to improve strategic appropriateness and effectiveness. The most recent of these evaluated the subsequent performance and impact of the relief operation, judging that a mixed performance by most agencies had nevertheless scaled-up the response and its impact quite rapidly, and, in spite of its late start, had largely succeeded in its principle aim of saving lives that were otherwise at risk.

In addition to its own assessments, DFID also funded a learning event on Niger hosted by the Overseas Development Institute in early October 2005. This brought together bilateral and multilateral donors, NGOs, the media and humanitarian experts to reflect on the food crisis, the international response, and its strengths and shortcomings. A full report on this event, entitled "Beyond the Blame Game", can be found at http://www.odi.org.uk/hpg/index.html .

The Good Humanitarian Donorship (GHD) initiative is currently being piloted in only two African countries, Burundi and DRC, so the Niger response was not explicitly modelled around GHD research. Nonetheless, DFID's response drew heavily on the GHD principles, as follows:

§§ Humanitarian funding was allocated in proportion to need, and on the basis of needs assessments.

§§ Humanitarian assistance was and continues to be provided to Niger in ways that are supportive of recovery and long-term development. Now that a good harvest has arrived, many of the UN and NGO partners receiving funding from DFID in Niger are in the process of transforming their activities from immediate relief towards boosting recovery and addressing longer term needs.

§§ DFID funding supported and promoted the central role of the UN in providing leadership and coordination, with US$150,000 provided to the UN Office of the Coordinator of Humanitarian Affairs (OCHA) for these specific purposes.

§§ DFID funding was provided from unallocated budgets and Africa Division's Humanitarian Reserve, and so in no way adversely affected other planned assistance to Africa.

§§ DFID has offered maximum flexibility to many of its partners in Niger to adjust their operational responses as the needs and the evolving situation dictate.

§§ DFID supported learning and accountability through its funding support to the ODI lessons learning event, referred to above.

HIV and AIDS

11.11. The report makes reference to a meeting in London in March 2005, 'The Three Ones in Action: Making the Money Work', which identified a shortfall of at least US$8 billion for the global response to AIDS over the next three years (p129). What decisions were made in relation to this shortfall? Has a commitment been made to find the extra finance?

At their Summit at Gleneagles in July, the G8 leaders made a commitment "to develop and implement a package of HIV prevention, treatment and care, with the aim of as close to possible to universal access to treatment for those who need it, by 2010"[7]. The G8 further agreed to provide proper support to all children left orphaned or vulnerable by AIDS or other pandemics and to work to meet the financing needs for HIV/AIDS.

The UK hosted the third and final Replenishment Conference for the Global Fund in September. The outcome was that international donors pledged a total of US$ 3.7 billion to the Global Fund for the two-year period of 2006 and 2007 and strengthened efforts to focus on performance and work closely with other key players. The amount pledged by 29 donors represents more than half of the Global Fund's total resource needs for the two-year period. Since the Replenishment Conference the US House and Senate Conference Committee have approved the foreign operations bill for financial year 2006, which will provide $450 million for the Global Fund. The Global Fund is anticipating a further $100m through the US Health and Human Services Bill.

In July 2005, the UK announced a doubling of our support for the Global Fund to fight AIDS, TB and Malaria to £100m per year for 2006 and 2007. We also announced a doubling of support for UNAIDS this year.

The "Three Ones in Action: Making the Money Work" meeting in London in March was the beginning of a process both to deliver more aid and better aid to tackle HIV and AIDS. The meeting identified four key problems:

a.a. AIDS money is spread unevenly including high prevalence countries lacking support;

b.b. the huge administrative burden placed on governments by AIDS donors;

c.c. overlap among international AIDS agencies;

d.d. more investments needed in people and systems to deliver prevention, care and treatment.

The meeting also set up the Global Task Team on Improving AIDS Coordination Among Multilateral Institutions and International Donors (GTT) to develop solutions to these problems.

A revised estimate of the resource needs for an expanded response to AIDS in low and middle-income countries, prepared by UNAIDS in response to calls from the Making the Money Work meeting, showed that there were annual needs of US$15 billion in 2006, US$18 billion in 2007 and US$22 billion in 2008 (with at least an additional $18 billion required over the next 3 years) to achieve universal AIDS programmes including steps towards universal access to treatment by 2010, comprehensive HIV prevention services, and to deliver care for 12 million orphans and vulnerable children in Africa by giving them better access to education, health care, home support and cash transfers.

The GTT made important recommendations that should lead to more effective country-led AIDS programmes, supported by the international community.

PSA targets

12.12. The 2004 annual report contained charts showing changes over time in the proportions of regional populations living on less than US$1 each day. Why have you removed these charts from the 2005 report? Can you provide the Committee with copies of such charts please, detailing progress since 1990?

The graphs included in the 2004 Departmental Report were used for illustrative purposes to complement the descriptions provided in the surrounding text. They were not viewed as an essential "must have" in all Departmental Reports and were therefore not included in the 2005 report, but if the Committee would like to seem them included in future Reports we shall do so. Information on progress is provided in the text of chapters 1 to 4 of the 2005 report.

Copies of the charts are reproduced here for your reference.

From the World Bank's World Development Indicators 2005

http://www.worldbank.org/data/wdi2005/wditext/Section1_1_1.htm

13.13. Various PSA targets are assessed as being "too early to say", but are expected to be "on course" by 2006. In relation to PSA 1, sub-target 1 for example, the official assessment is that the target will be on course by 2006, yet the annual report suggests that: "it is too early to say if it will fall below the 1990 figures by 2006" (p185). How can you predict success when the current picture is unclear?

The 2004 Departmental Report (DR) reported the percentage of people living in poverty in sub-Saharan Africa as 49% - above the 1990 baseline of 48%. Whilst the 2005 DR figure showed further improvement to 46%, below the 1990 baseline (and hence appearing to meet the target), the rate of progress is slow. Data and measurement problems in Africa mean that small percentage movements may lie within a margin of error and not reflect sustainable progress.

However, economic growth in Africa averaged 5.1% in 2004 - an eight-year high - and solid economic growth in Africa is expected to continue into 2005 and 2006. This should increase the rate at which progress against the target is made. (Nevertheless, the positive growth outlook is dependent on the global economy. African economies remain vulnerable to a range of shocks, including oil or commodity price movements, exchange rate fluctuations, and severe adverse weather conditions.

On the basis of the above, the decision was taken to indicate that DFID appeared to be on course to meet the target - but to qualify in the narrative that it was still too early to say definitively that the target will be met.

14.14. Various PSA sub-targets have been subject to baseline revisions. In some instances these are quite substantial. With respect to PSA 1, sub-target 2, the baseline has been revised from 58 per cent to 68 per cent, yet the target remains unchanged at 72 per cent. Given the substantial increase in the baseline, shouldn't the target also be increased so as to ensure it remains relevant?

The 2003-06 PSA set specific target figures to be achieved in respect of progress towards the selected Millennium Development Goals being monitored for Africa and Asia. Over time, as we reviewed progress towards the PSA targets, we found that new data had become available, often resulting in a revision of the figures for previous years. This means that many of the baselines set out at the time our PSA was originally drafted were altered, a situation that is particularly apparent in series which are modelled by the international agencies, such as the under-five mortality rate. For the 2003-06 PSA DFID's Technical Note explains this difficulty. It is recognised that baseline movements may appear to make it easier to achieve certain targets, while in other cases, such movements make attainment even more difficult.

Learning from the problems with the 2003-06 PSA, targets for the 2005-08 PSA are framed in terms of percentage point improvements. This means movement of the baseline is not a problem; progress will simply be assessed against the latest baseline.

15.15. The report highlights a lack of reliable data on progress in moving towards universal primary school education in high population countries that are important for the achievement of the MDGs in Africa (p20). Is there any indication of when such data will be available? What is DFID doing to improve data collection in this area?

UN agencies are responsible for monitoring progress towards the MDG goals at a global level. Many countries lack sufficient data to be able to do this regularly, currently the subject of a report by the UN Statistics Commission.  DFID is one of the most active bilateral agencies working to support the development of capacity in developing countries to produce high quality statistics. DFID works through the international agencies such as the World Bank, the UN agencies and the OECD to support efforts on statistical capacity building. DFID also works bilaterally with some countries on specific statistical capacity building measures where there is demand. DFID is one of the major funders of the Partnership for Statistics in the 21 Century (PARIS 21) which is leading on a strategic approach to capacity building. DFID was also one of the key agencies in the development of the Marrakech Action Plan for Statistics (MAPS) and is actively involved in the development and delivery of that programme.

Despite this, much however remains to be done to ensure that sufficient data is available to adequately monitor progress towards achievement of the MDGs. This requires a real and active commitment from developing countries, supported by adequate resources, to develop national statistical systems to help them plan effective policies and to be accountable to their citizens for their outcomes.

16.16. With respect to PSA 2, sub-target 7, data is described as being "very patchy" with figures varying "enormously between different survey sites in the same country" (p191). As such, progress against the target is assessed as being "too early to say". What is DFID doing to improve data collection, quality and reliability? When do you expect to be able to make an assessment?

UN agencies are responsible for the global monitoring of HIV and AIDS. While there has been an improvement in the availability of data much remains to be done. DFID actively supports initiatives to improve data quality and comparability, and supports the work of UNAIDS and WHO, both of which are actively involved in supporting statistical capacity building in this area.

An assessment of whether the overall target is being met will be made as soon as the quality of available data has improved.

17.17. With respect to PSA 2, sub-target 8, TB detection rates stand at 26 per cent against a WHO target of above 70 per cent. Why is this target so far off-track? What is DFID doing to improve performance? The target remains unaltered in the SR04 PSA. To what extent is this target realistic and achievable?

The 70% case detection target has been agreed by PSA countries, even though many started from a very low base. It is ambitious but necessary if the 2015 MDG targets for reduced incidence (new infections), prevalence (total infections) and mortality rates are to be met. More recent data indicates improvements, which DFID will continue to support. The long-term rates of progress will have to be improved if the 2005-2008 PSA target is to be met.

A particular challenge in Asia is to include the many people who attend a range of non-state sector health providers into the national TB case detection and treatment programmes.

Some examples of the work that DFID is doing to improve performance are:

§§ in Pakistan, DFID supports progress towards meeting the target through our contribution of £65 million (2003-2007) to the National Health and Population Welfare Facility. This focuses on improving health outcomes in seven federal health and population programmes, including the National Tuberculosis programme;

§§ Bangladesh has received a $43 million grant from the Global Fund on AIDS, TB and Malaria (GFATM), for a comprehensive tuberculosis control programme. The UK is a key contributor to the Fund, having pledged £125 million in 2002 over 5 years and announcing a new pledge in July 2004 of £154 million over the next 3 years (2005-2008). Tuberculosis case detection will also be tracked in Bangladesh as part of DFID's support to the health sector, and is one of the indicators for performance-related financing.

18.18. There are no targets associated with Objective III of the PSA, Poverty reduction in Europe, Central Asia, Latin America, the Caribbean, the Middle East and North Africa. Instead, work is said to be guided by four principal aims. These aims appear to be somewhat vague, dealing in terms such as "Supporting the development..." and "Working to improve..." (p69). Why have you not produced targets in relation to these aims? In the absence of targets, how is progress being monitored and driven forward?

We do not have a separate published target for Objective III, nor for the principal aims of our work in Europe, Central Asia, Latin America, the Caribbean, Middle East and North Africa, because the number of public PSA targets are necessarily limited; the countries involved are middle income rather than low income; and DFID's resources allocated to these areas are relatively small compared to those of the major donors and to our expenditure elsewhere.

However, the Director's Delivery Plan, which covers these regions, and each of the relevant Departments' Business Plans, have a detailed set of measurable targets which indicate the extent to which the overall aims are being achieved. Many of our activities and hence the targets in these regions are focused on the extent to which we can influence and enhance the effectiveness of the multilateral agencies - the EC, the World Bank and the Regional Development Banks - of which we are members. For example, the Latin America and Caribbean Department has a target to enhance the effectiveness in reducing poverty of the Inter American Development Bank and the World Bank's work on trade and markets. It has a further target on effectively tackling the spread of HIV and AIDS in the region.

These and many other targets are monitored by twice-yearly reporting through the Regional Director to the Director-General for Regional Programmes and annually to the Management Board and Ministers. The Regional Director is expected to meet at least 75% of the targets set.

19.19. The Department reports that many of the countries covered by Objective III are likely to miss various MDG targets including those on poverty and hunger (p67). Table 2 in Annex 1 of the report shows that DFID expenditure on Reducing Poverty in the Rest of the World is set to decline from £450 million in 2003/04 to £261 million in 2004/05 and £172 million in 2007/08. Is this decrease entirely due to transfers from programmes in these countries to reconstruction and development assistance for Iraq? What impact will this have on the ability of these countries to meet their MDGs?

DFID's resource allocation decisions are driven by our strong focus on the achievement of the MDGs, and our analysis of our comparative advantage. The expected decline in expenditure on Reducing Poverty in the Rest of the World is primarily due to the commitment made by the British Government in 2003 to raise aid to low income countries to a minimum of 90% of DFID's total bilateral programme by 2006. Aid to middle income countries, which are the main constituent countries of this region of the world, is due to fall from 23% to below 10% of total bilateral expenditure. Therefore a reduction in UK bilateral assistance to this part of the world was planned prior to the commitments in Iraq. Reconstruction and development assistance for Iraq is included in the Rest of the World figures.

Compared to its role in Africa and Asia, DFID is a relatively modest contributor of bilateral financial aid to most of the countries in the Rest of the World group. Much of our support is in the form of technical expertise which can have a disproportionate impact on policy making and institutional building. We are also channelling much of our effort into increasing the effectiveness of the multilateral agencies with their much larger aid flows. Recent examples of this approach include:

§§ Joint work with the FCO to enhance the social and economic focus of the Euro15 billion European Neighbourhood and Partnership Instrument;

§§ Providing technical assistance to UNAIDS to work with the Governments of Russia and Ukraine to develop their national strategies to prevent the spread of HIV and AIDS, in a region where the epidemic is one of the fastest growing in the world.

20.20. The current assessment of progress on PSA 3, sub-target 1 is that it is "too early to say" but that it is expected to be "off-track" by 2006. Why is it currently judged as being "too early to say" when 56 per cent of European Community expenditure in 2003 was in low-income countries against a target of 70 per cent? Does this not simply suggest it is off-course?

Current forecasts for expenditure in 2006 suggest that the middle-income share of the budget will remain roughly constant and that without a considerable shift in the allocation of resources towards low income countries the Commission will not make significant progress towards the PSA target of 70%, which is why we expect the sub-target to be off track by 2006. As currently organised, the structure of the Commission budget weighs heavily in favour of commitments and spending in middle income countries. This can only be rectified if the balance of allocations between instruments is altered, for example in the next budget.

However, until there is outturn data for Commission financial years 2005 and 2006, and given the significant improvement from 51% to 56% in 2003, at this stage we cannot determine that there will not be further progress towards this target, hence the current position assessment that it is too early to say. DAC data recently released suggests the low income focus slipped back to 55%, which is disappointing as it followed the improvement in 2003.

21.21. In relation to PSA 4, the Department's current assessment is that the target is "off-track" and that: "There now needs to be considerable technical work if the next Ministerial meeting (Hong Kong, December 2005) is to make further substantial progress towards a rapid and successful conclusion of the Doha Round" (p86). Can you provide us with an updated assessment of what progress has been made towards such an outcome?

The World Trade Organisation (WTO) talks in Hong Kong have ended in agreement. There has been some progress on a few important issues, but very little movement on the key issue of market access. We are disappointed by the outcome. But the agreement does pave the way for further talks in 2006, keeping open the prospect of a successful conclusion to the Doha development round.

The big issues in the round are agriculture, non-agriculture market access (NAMA) and services. This was where we had hoped for a breakthrough at Hong Kong. The main successes were:

* All 150 member countries agreeing to end all forms of agricultural export support by 2013

* The agriculture and NAMA talks also agreed on some broad principles, and a deadline of 30 April 2006 for agreeing modalities, which are the detailed framework of an agreement.

* The services talks agreed some new negotiating guidelines and a deadline of 31 July 2006 for revised offers for market access.

The UK and the EU had put a great deal of emphasis on a development package to complement progress on market opening. There were some achievements here also:

* All developed countries will now grant duty and quota-free market access for at least 97 per cent of tariff lines on products originating from the Least Developed Countries (LDCs) by 2008.

* Export subsidies on cotton will be eliminated in 2006 and all LDC cotton exports will be granted duty and quota-free market access as soon as the Doha round is concluded.

* A Task Force will provide recommendations by July 2006 on how to make Aid for Trade most effective.

The outcome from Hong Kong provides a road map for the conclusion of the Doha Development Round at the end of 2006. The UK Government remains committed to a successful round which has the potential to lift millions of people out of poverty.

22.22. PSA 5, sub-target 2 considers the proportion of DFID's bilateral projects evaluated as successful. Performance is recorded for high-risk, medium-risk and low risk projects and programmes of £1 million or more that have been in operation for at least two years (pp196-199). Are the assessments carried out internally? If so, who validates the assessments?

The evaluation of individual projects/programmes which produces a performance score is a customised exercise to ensure that it is proportionate to the investment involved. For larger projects/programmes, it is likely to involve a range of stakeholders beyond the DFID team, including partner governments, any other donors also involved in the project/programme and external reviewers. For smaller projects/programmes, the exercise will be less intense, but will often involve an external reviewer or review team. In completing forms which give performance scores, the budget holder must justify the score given and provide information on how the review was undertaken. Within country programmes, Heads of Office are required to sign off on Reviews. DFID's Corporate Strategy Group, which manages the PRISM database where performance data are held, has been quality assuring reviews submitted over the past year and sending queries and poor examples to Heads of Office for them to investigate and resubmit.

23.23. The Department reports increases in the proportions of low- and high-risk projects evaluated as successful, but judges the medium-risk indicator to be "too early to say" (p198). Quarterly figures show that the proportion has fallen from the baseline of 61 per cent to 51 per cent in the first quarter of 2005. Why is this indicator not considered to be "off-course"? What are the reasons for the decline in performance and what is DFID doing to alter the situation?

DFID's target is based on the value of projects/ programmes within the portfolio, rather than the number of projects. Thus just one or two very large, expensive projects/ programmes can have a large impact on the overall position. In reporting progress we also show the outturn in relation to the number of projects/ programmes and here there was not evidence of such a decline in performance. Hence there were concerns that what we might be seeing was a reflection of the methodology we use rather than a 'real' decline in quality.

The method of assessing progress against this PSA target has changed for the 2005-08 PSA in an attempt to reduce volatility in the indicator. To enable us to include more projects/ programmes in the score, we are including data gathered over a two year period rather than one year (although any individual project is only included once) and are including project completion reviews as well as annual reviews undertaken when the project/ programme is operational.

DFID is taking the following steps to improve portfolio quality:

1. Providing better guidance and training for programme managers

§§ We have revised mandatory programme management procedures into a single framework. Attendance at launch presentations was mandatory, and a member of MB attended each one.

§§ Training on programme tools and procedures has been re-formulated to: take account of emerging management lessons from annual reviews; explain each stage of DFID's investment cycle; describe how DFID supports and assesses programme performance; and encourage donor harmonisation.

2. Raising the profile of portfolio quality

§§ The Management Board has given this priority for bilateral programmes. Directors' Delivery Plans must set out how they will improve project performance and offices with low portfolio success will be subject to performance assessment.

§§ DFID's Performance Reporting Information System for Management (PRISM) has been re-launched with more accessible lessons on management, partnerships and best practice, and better guidance on assessing the performance of programmatic support.

§§ Quality assurance through imposing Head of Department responsibility for PRISM reports, and central review and challenge to incomplete or poor standard reviews. The most important projects, with greatest impact on overall performance, will be tracked centrally.

3. Supporting improved monitoring and lesson learning in DFID

§§ Project review information in PRISM is analysed to feed into improved programme guidance and training, as well as to regional and major country programme trend reports to the Management Board.

Agriculture

24.24. The Department points out that it is one of the few donors whose support to agriculture in real terms has remained constant over the last 20 years, with total OECD assistance to the sector declining by 38 per cent between 1980 and 2000 (p122). What is the reason for this divergence? The G8 leaders concluded at Gleneagles that "Investment is needed in sustainable agriculture" and they agreed to "strengthen our support for their [African governments'] commitment".[8] Do you expect this commitment to reverse the negative trend in assistance for agriculture?

DFID has always recognised agriculture's importance for the livelihoods of poor people. Our agriculture policy paper published on 7 December renews our commitment to the sector and emphasises the broader importance of agriculture as a driver of economic growth that benefits poor people.

There is probably no single cause to explain the decline in funding from other OECD donors. Donors and developing country governments alike lost confidence in agriculture, due in part to perceived high transaction costs and complexity of investments in the sector. At the same time changes in development policy in favour of market-led approaches were inconsistent with prevailing state-led approaches of many governments, and a shifting emphasis in development assistance towards health and education also played a part.

However, the renewed focus on agriculture that emerged from the G8 meeting reflects a growing international consensus that change is needed. Leaders in Africa are increasingly clear of the priority they attach to agriculture, and have pledged to allocate 10% of their budgets to agriculture (currently 2.4%). This is likely to be reflected in many new PRSs.

DFID and other donors are working in country and regionally to identify how to provide support most effectively. DFID's partnership with NEPAD in developing their Comprehensive African Agriculture Development Programme is a good example. This will ensure greater harmonisation and more effective development assistance to agriculture in Africa. There are indications that it will also lead to increased levels of funding for agriculture from bilateral and multilateral donors.

Iraq

25.25. After reading the 2004 annual report, the Committee recommended that the Department present information relating to funds spent in Iraq and development outcomes more clearly. DFID promised to do this in the 2005 report.[9] Accordingly, this year's report contains a table distinguishing between UK bilateral and multilateral contributions. There is still little discussion of the outcomes of this spending however, beyond phrases such as "considerable progress" and "slowed... pace of reconstruction" (pp74-75). Can the Department provide the Committee with further details of progress, clearly linking outcomes to lines of expenditure?

Please see the following table.

DFID IN IRAQ: OUTCOMES TO EXPENDITURE

NON-GOVERNMENTAL ORGANISATIONS

Governance

26.26. The report makes reference to the introduction of a new system known as QUEST, which is to be launched in pilot offices in Kenya and the UK in the summer of 2005 and deployed worldwide during the remainder of the year (p152). Have the pilot schemes been introduced now? What is your initial assessment of the success of the pilots? Does the timetable remain on track?

The QUEST system has four main components: an Electronic Document and Records Management System replacing the current paper based filing system; new collaboration software allowing DFID staff to set up team areas to share documents, hold discussions, publish announcements, and access reference material; a new email system; and upgraded computers for all DFID staff.

Pilot schemes were introduced in May 2005 in the DFID Kenya office and three UK sections, with review and feedback to the project team during June 2005. We are now well advanced in implementing QUEST across the rest of the Department.

We conducted a formal assessment of the pilots, covering all training, implementation and technical aspects. Some initial technical problems were identified, which have since been resolved and our approach to the main roll-out adjusted accordingly. The support and training arrangements were also reviewed following feedback which showed how crucial early preparations were for successful adoption of the new toolset. Overall, the pilots were a success and provided the basis for proceeding with the main roll-out. Evaluation reports from recent deployments have been positive, particularly so in the aspects where we have made changes resulting from the pilots.

The rollout will be completed for almost all UK and overseas users by the end of 2005. In a small number of cases, sound operational reasons have emerged to delay the deployment slightly. It is predicted that the full rollout both in the UK and in DFID's overseas offices will be complete by the end of March 2006.

27.27. The Department's HIV and AIDS Employment Policy was extended in October 2004 to include the dependents of staff appointed in country. As such, any child born or adopted by a member of the local staff, whose 21^st birthday falls after 1 October 2004 and who is dependent on that member of staff qualifies for Highly Active Anti-Retroviral Treatment (Box 7d, p161). Can you provide the Committee with details of any estimates of potential costs you put together prior to the extension of this policy?

In arriving at the decision to extend cover to children, we worked closely with the Foreign and Commonwealth Office (FCO) and the British Council, and discussed our proposals with other donors - Ireland and the Netherlands - who have similar policies. The FCO already had estimates of extending provision to children.

We also sought general feedback from our overseas offices on the levels of take-up of Highly Active Anti-Retroviral Treatment (HAART) by staff and their partners, and in-country arrangements for the provision of treatment. Many DFID offices had moved to a medical insurance scheme that covered AIDS treatment for a small additional premium.

In Kenya, the cost of providing this additional cover for all SAIC and dependants was less than the actual cost of providing treatment for one HIV patient (around £15,000). Using national modelling, we also estimated that it would cost DFID Malawi around £1,400 per year to include children. We recognised that this figure could rise to a maximum of £7,200 per year as more children come into the scheme and others continue on HAART. However, likely costs would be very much lower than these figures, as experience at that point had shown low take-up by staff and partners. For reasons of confidentiality, it is not possible to say exactly how many staff are affected and in how many offices, but there are currently only a small number of offices affected. Most of the costs are covered under the medical insurance schemes, but in one office where it is not, the cost is around £2000 per annum for one member of staff.

The price of HIV treatment continues to fall dramatically (for example, in Zambia the cost of ART has fallen from US$269 in 2003 to US$165 in 2005 per person per year and in Mozambique from US$300 in 2002 to US$153 in 2005), and therefore the costs to Her Majesty's Government (HMG) as an employer are likely to fall further in developing countries. In addition, local medical insurers are increasingly covering HIV and AIDs treatment for a small additional premium.  Finally, support by the international community for increased access to treatment - and universal access by 2010 - means treatment should become increasingly accessible.

In excluding dependent children, our original policy carried the risk that medicines that were intended for parents would be shared with a child if they were infected. This raised significant concerns around drug resistance, with both parent and child having inadequate dosage and poor clinical management. Furthermore, the proportion of children born to HIV-positive mothers who then became positive themselves has proven to be small. The proportion is declining further as simple one-off treatments have become more widely available. It was on this basis, together with reducing costs of treatment, that we took the decision to include dependant children in the policy.

LIST OF ABBREVIATIONS

ACP African Caribbean and Pacific regions

AfDB African Development Bank

AsDB Asian Development Bank

AVE Ad Valorem Equivalents

CAR Central African Republic

CDB Caribbean Development Bank

CHASE Conflict, Humanitarian and Security Department (of DFID)

CSF Civil Society Fund

CSO Civil Society Organisation

COSIT Central Office for Statistics and Information Technology

DAC Development Assistance Committee

DCECI Development Cooperation and Economic Cooperation Instrument

DRC Democratic Republic of Congo

DFID Department for International Development

DDA Doha Development Agenda

DDP Director's Delivery Plan

EC European Community

EPI Expanded Programmes of Immunisation

EU European Union

IADB Inter-American Development Bank

IREP Iraq Reconstruction and Employment Programme

FCO Foreign Commonwealth Office

GSP Generalised System of Preferences

GHD Good Humanitarian Donorship

GTT Global Task Team

GFATM Global Fund to Fight Aids, Tuberculosis and Malaria

HAART Highly Active Anti-Retroviral Treatment

HIPC Highly Indebted Poor Countries initiative

HIV Human Immune Deficiency Virus

HMG Her Majesty's Government

ICRC International Committee of the Red Cross

IST Iraqi Special Tribunal

IECI Independent Electoral Commission for Iraq

IWPR Institute for War and Peace Reporting

IDA International Development Association

IMF International Monetary Fund

LDCs Least Developed Countries

MAPS Marrakech Action Plan for Statistics

MDG Millennium Development Goal

MATs Mine Action Teams

NEPAD New Partnership for African Development

NGO Non Governmental Organisation

ODI Overseas Development Institute

OECD Organisation for Economic Co-Operation and Development

PHC Primary Health Centre

PSA Public Service Agreement

PRISM Performance Reporting Information System for Management

PRS Poverty Reduction Strategy

PSI Policy Support Instrument

PRS Poverty Reduction Strategy

PRGF Poverty Reduction and Growth Facility

PPF Political Participation Fund

UNAIDS Joint United Nations Programme on HIV/Aids

RFFI Reconstruction Fund Facility for Iraq

UNDP United Nations Development Programme

UNICEF United Nations Children's Fund

WTO World Trade Organisation

[1] IDC, Department of International Development: Departmental Report 2004: Government Response to the Committee's Eighth Report of Session 2003-04, HC 327, 9 February 2005, pp2-3

[2] Council of the European Union, General Affairs and External Relations Press Release 14172/05 (Presse 289), Brussels, 21-22 November 2005

[3] IDC, Department for International Development: Departmental Report 2004, HC 749, para 18

[4] Assessment Letters from the IMF can be requested by any low income country or donor(s) to that country. The letters provide an up to date assessment of the country's macroeconomic conditions, prospects and policies to enable the recipient to form a clear view of their strengths and weaknesses.

[5] In order to qualify to graduate from the HIPC initiative countries must demonstrate macroeconomic stability by having successfully implemented a Poverty Reduction and Growth Facility (PRGF) for at least six months. The PRGF is an IMF lending programme designed to support economic development and poverty reduction in low-income countries.

[6] IDC, Department for International Development: Departmental Report 2004, HC 749, para 28.

[7] Para 18 d, G8 Leaders Communiqué, 8 July 2005

[8] G8 Gleneagles 2005, The Gleneagles Communiqué, para 20

[9] IDC, Department of International Development: Departmental Report 2004: Government Response to the Committee's Eighth Report of Session 2003-04, HC 327, p3