Clause 8 - Arrangements with third parties

International Development Bill [Lords] – in a Public Bill Committee at 11:30 am on 27th November 2001.

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Photo of Caroline Spelman Caroline Spelman Shadow Minister (Women), Shadow Secretary of State for International Development 11:30 am, 27th November 2001

I beg to move amendment No. 10, in page 3, line 31, at end add—

`(3) The Secretary of State shall ensure that, taking one year with another, not less than 15 per cent. of development assistance given under section 1 is distributed through charities and other non-governmental organisations specialising in development.'.

This is another probing amendment, which would place on a more stable financial footing the Government's relationship with charities and non-governmental aid organisations specialising in development. It would ensure that development assistance provided through charities and non-governmental organisations could not fall below 15 per cent. of the total development assistance, and would help to build strong support for development and act as a check against over-centralising Government.

The percentage is stated merely as part of a probing amendment, but we strongly believe that it is important to create the right balance in terms of the work of NGOs. We are concerned about any drift away from working with NGOs towards providing more assistance directly to Governments of developing nations, because we often seem to lose accountability for money given in that way. Some bad examples of funds given to developing countries that have ended up in Swiss bank accounts have arisen out of the direct provision of aid to Governments. It is a simple fact of life that some Governments are corrupt.

The developed world has found it difficult to keep a handle on aid given directly to Governments. By comparison, giving money through NGOs, especially those based in this country, provides a good opportunity for accountability, analyses of the way in which money is spent and the capacity to check that it has been spent as NGOs say that it has.

NGOs have a good record of rolling out projects and keeping their administrative costs at a low level to ensure that nearly all the money is used in the project for which it was envisaged. We believe that, as a nation, we are blessed with especially strong NGOs that enjoy a good reputation abroad for being effective in global poverty reduction, which is the purpose of the Bill. Charities and NGOs are more than service providers, and they should be fully supported in the Bill. They are important partners for the Department, and we would like to see that fact recognised as part of the legislation.

Aid distributed by UK-based charities and NGOs amounted to £195 million in 2000. That is roughly 8 per cent. of the departmental budget. We would like their role in development to be boosted and their involvement increased. The figure of 15 per cent. is hypothetical, but by suggesting it we seek to express our desire for them to be more rather than less actively used by the Department. An increase in Government funding for charities would involve more people directly or indirectly in development programmes and projects, so support for development would increase.

Charities are successful in this country in raising money in appeals and giving clear evidence of the work that they undertake. That is popular with the public. To understand that popularity, we need only think of examples of big gift days such as Comic Relief day, when a great deal of publicity is given to the work that charities do in the developing world. We want to see the Government endorse that by a reference to the work of charities and NGOs in the Bill and, where possible, by allowing them to do an increasing amount of work.

Photo of Tony Cunningham Tony Cunningham Labour, Workington 11:45 am, 27th November 2001

The problem with the amendment, as with many of the Opposition's amendments, is that it is prescriptive. Aid is not about protecting British charities. I spent some time in Eritrea, where the Government concluded that its dependence on charitable organisations as well as the United Nations and other organisations meant that many white faces were seen in Land Rovers driving around with nice badges on the side, which was not particularly what they wanted. So the Eritrean Government threw out all the NGOs. They feared that they would become dependent on foreign aid.

That is just one example. My point is that every country is different. The arbitrary figure of 15 per cent. might work in one country but not in another. The important thing is to ensure that the aid that is sent is as effective, and as well used, as possible.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (International Development), Liberal Democrat Spokesperson (International Development)

We are sympathetic to the motivation for the amendment, but not necessarily to the effect that it might have. The hon. Member for Meriden argued that the amendment would place charities on a more stable financial footing. Although we all want that, it cannot be a direct purpose of the Bill, which must be directed towards the purposes set out in clause 1. I pay tribute to the vital work of charities and NGOs, but it must be wrong to set an arbitrary limit of the type suggested.

It must be our ambition to empower the recipient Governments through the development of plans for the use of the aid. It must be right to empower them as much as possible to be responsible for the aid, rather than to impose it on them. For those reasons we oppose the amendment.

Photo of Tom Clarke Tom Clarke Labour, Coatbridge and Chryston

Like my hon. Friends, I understand where the hon. Member for Meriden is coming from. We all share enormous regard for the aid agencies and NGOs. Of course Governments do not behave as well as they should. The input from the organisations concerned is crucial. However, I wonder whether the hon. Lady's objective would be secured if we accepted the amendment. I do not think that it would.

The hon. Lady described the percentage as hypothetical, but once a provision is included in legislation it ceases to be hypothetical and becomes statutory—an obligation. The things that she argued for, with some conviction, with respect to reconstruction, would suffer. From my limited experience of visits to northern Iraq and Kurdistan, I would say that the enormous transformation that I saw there was in the main due to the United Nations and its various agencies.

The NGOs and charities had a role, but I should be very surprised if that involvement came anywhere near 15 per cent. Therefore, sticking to the amendment would inhibit the hon. Lady's objectives with respect to reconstruction. We all appreciate the vital role of charities and NGOs, but I think that even the hon. Lady would not want to impose the straitjacket of that 15 per cent. figure on the Bill and on the activities of Government, NGOs, United Nations agencies and others.

Photo of Hilary Benn Hilary Benn The Parliamentary Under-Secretary of State for International Development

This has been a useful debate, giving the Committee the opportunity to tease out some of the issues that the Department—and any Government—grapples with regularly in deciding the most appropriate form of development assistance to give. Incidentally, the power under the Bill to support NGOs is clearly set out in clauses 1 and 8.

The Government obviously have the power to fund those organisations. As the hon. Lady acknowledged, and as my right hon. Friend the Secretary of State said on Second Reading, civil society has an important role to play in eliminating poverty. We channel a substantial proportion of our resources through United Kingdom civil society groups. The hon. Lady referred to the £195 million paid out in the year ended 2000. That is 8 per cent. higher in real terms and 17 per cent. higher in cash terms than in 1996–96, and it is a rising trend. That figure should be compared with the £170 million that we gave the World Bank and the £151 million that we gave the United Nations for the same period.

It is important to note that, because those figures relate to UK civil society groups, they do not capture the substantial sums that we channel through civil society groups in developing countries; Bangladesh is a good example. We are supporting organisations such as BRAC and Proshica, which are working in primary education, primary health care and micro-credit, and we are in the process of launching a programme in Bangladesh to enable, encourage and support civil society organisations in that country to engage more in society, and to enter into dialogue with the Government about what is needed in order to further development. We have no argument about the important contribution that civil society organisations have to play but, for reasons that other hon. Members have rightly alluded to, the Government feel that it would be wrong to prescribe an artificial 15 per cent. limit.

I want to mention a matter that was raised by my hon. Friend the Member for Crosby, who is not currently in her place: the decision on where best to give that support. I appreciate her argument about the difficulties of corruption, which continue in some places, but the view is increasingly taken that if the Governments of developing countries are evidently committed to making progress on the reduction of poverty, the provision of education, the promotion of health care and so on, and have in place credible mechanisms for doing so, it is right and proper that donors, ourselves included, should be prepared to given them budget support. It is a very practical way of supporting those Governments to help them acquire the means to enable the development of their countries to take place.

The Government's view is that it should not be a contest. It should not be a fight between the different means of promoting development. It should be about forming a judgment on each country's particular circumstances; as my hon. Friend the Member for Workington (Tony Cunningham) rightly said, the circumstances will differ. It is therefore necessary to have flexibility in the legislation, and the Secretary of State needs the discretion to exercise his judgment appropriately. In the end, it is right to weigh up all those circumstances, and to decide which is the most effective form of aid and assistance, so that we can achieve the objectives that we are all signed up to.

Photo of Caroline Spelman Caroline Spelman Shadow Minister (Women), Shadow Secretary of State for International Development

It has been an interesting discussion; that was one reason for moving such a probing amendment. I have heard what I wanted to hear—that there is a rising trend in the provision of funding to NGOs and charities. I hope that my thesis that it will continue proves true, because the Department's review of the effectiveness of development assistance—an important exercise—will make apparent how effective the NGOs and charities are. I am encouraged to hear that the trend is rising. A number of hon. Members have placed on the record the high regard in which the work of those organisations is held. It was important to state that during our debates.

The hon. Member for Workington said that, in the eyes of the Governments of some developing countries, the way in which the NGOs had conducted their work had not been good. In the short time that I have held this brief, many NGOs have taken that lesson on board. For example, it is plain that in Afghanistan they provide an increasing amount of assistance through local partners, who conduct themselves with greater sensitivity to the local population, mindful of ways of behaving that can send entirely the wrong signal about the spirit in which help is given. That was an important point to bring out in the debate. However, the amendment was a probing one, which has allowed us to touch on the relationship between the Department and NGOs and charities. I am satisfied that the Government intend to continue growing that relationship, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Caroline Spelman Caroline Spelman Shadow Minister (Women), Shadow Secretary of State for International Development

I beg to move amendment No. 15A, in page 3, line 31, at end add—

`(3) The arrangements made by the Secretary of State with third parties shall include a separate specific amount to be used for administrative purposes only.'.

We can probably discuss this probing amendment relatively briefly. The amendment is designed to ensure that we dwell for a moment on the subject of containing the amount of public funding spent on administration. I am sure that all hon. Members will remember a lot of public disquiet relatively recently about the amount of money that is spent on the administration of development assistance.

Charities in particular have had to become much more assiduous in that regard and account for the percentage that they spend on administration. I believe that we all understand why such procedures are necessary. The public were concerned that too much of charities' and taxpayers' money was being spent on the administration of projects and that, as a result, less was being spent on the relief itself. The amendment is designed solely to ensure that, as time dulls the memory of that hiatus, we do not overlook the importance of containing the cost of administration.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee

As the Minister knows, I have a lot of time for the way in which he is attempting to deal with many of the amendments, but I hope that in dealing with this one he will not come out with his usual blanket comment. Saying, ``The aims of the hon. Member for Meriden are laudable, but I could not possibly put such a specific injunction in a piece of legislation,'' is, of course, perfectly acceptable. The Minister is quite right. That is why the amendment is intended only to probe. One cannot frame legislation in such a way that it tethers Ministers' hands by determining that they must provide a certain amount of money to be distributed by charities or that they must ensure that charities involved spend only a certain amount on administration; everyone accepts that.

However, I hope that the Minister will not simply dismiss the amendment, but will accept it as a probing amendment and use the chance that is being offered to him in this short debate to deal with many people's serious concerns about the amount of money that charities spend on administration. Many people believe that, of the money that they give—the criticism may be unfair; I do not claim to be an expert in such matters—too much is spent on administration and too little goes to the world's poor.

The Minister has a real opportunity to tell us in more detail what the Government are doing to counter that perception, how they are applying pressure to charities and how charities' practice is developing. What proportion of charities' spending is spent on administration, how are things improving and what can the Department do? I hope that we may have a short, positive debate on those matters.

Photo of Tony Cunningham Tony Cunningham Labour, Workington

I want to place on the record my utmost respect for British NGOs and charities. I have had experience of their work in many developing countries. They do an incredible job in very difficult circumstances.

The amendment draws attention to a problem that we have encountered before. On one hand, we demand that everything must be whiter than white and of the utmost probity, with full audits, annual reports and so on, but on the other we say, ``For heaven's sake, cut back on administration.'' We want to spend less on administration, because we want more money spent on what it needs to be spent on in the developing world. There must be a balance. That is the problem, and that is the judgment that the Minister has to make.

Unfortunately, I have some experience of European aid. To some extent because of corruption in parts of the world, everything has been tightened up so much that millions of euros are never spent. The work that needs to be done is not being done because of the administrative burden. The question is one of judgment and balance.

Photo of Julian Lewis Julian Lewis Opposition Whip (Commons) 12:00 pm, 27th November 2001

Does the hon. Gentleman accept that the amendment is phrased to give the Minister precisely the flexibility that he needs? When he looks at a third party's record, he can decide whether the proportion of money allowed for administration is relatively high or low.

Photo of Tony Cunningham Tony Cunningham Labour, Workington

I do not think that the amendment gives the Minister that flexibility, but the clause does. It allows him to make the judgment and balance the administrative burden that such organisations have to bear against ensuring that the bulk of the money is spent in developing countries.

Photo of Hilary Benn Hilary Benn The Parliamentary Under-Secretary of State for International Development

For just a nanosecond, I was tempted to follow the example set by the hon. Member for North Norfolk, but if I had done so I should not have been able to respond briefly to the points raised by the hon. Members for Meriden and for Gainsborough (Mr. Leigh). Not for the first time, the hon. Gentleman has enabled me to reduce the length of my contribution by accepting, as did the hon. Lady, that the amendment was a probing one. There would be practical difficulties in imposing a fetter, not least of which in certain circumstances would be the time and effort involved in deciding the appropriate sum to be spent on administration in relation, for example, to humanitarian relief. I shudder to think of people negotiating on that issue while those waiting for the relief wondered where on earth it was.

I accept what the hon. Gentleman said about charities. In the end, it is clearly for the charities to determine that they use the money that they receive as effectively as possible to their own system of governance, auditors, board of trustees and so on, as well as to the people who give generously to a wide range of charities that support development work. We would all concur with that, and we want to encourage it.

What my hon. Friend the Member for Workington said on Europe gives me an opportunity to draw attention to what is going on inside the European Community at the moment. A process is taking place to ensure that the substantial amount of aid that we give, in terms of our assigned contribution and that of other European Community member states, is used as effectively as possible, that the administrative costs are kept as low as possible, and that the maximum outcome in terms of improved opportunities for people in developing countries is achieved. As far as the European Community is concerned, we are in the middle of a process with the jury still out. Reforms and structures have been put in place, and we all want to see those changes deliver in the long term, for precisely the reasons that the hon. Lady outlined when she moved the amendment.

It is clearly essential that we keep the administrative costs of DFID as low as possible. Our general practice is to build a specific and identified sum for administrative costs into our arrangements with third parties, whether they are NGOs as we discussed in relation to the previous amendment, the UN, other intergovernmental bodies or private sector consultants and contractors. The amounts to be allocated for administrative costs are determined in negotiation, taking into account the nature of the task and the body in question. When we give unearmarked contributions to an international organisation, we make considerable efforts through its governing body to ensure that it is transparent about its administrative costs and keeps them to a minimum. When, for example, an international body on which we have representation discusses its budget for a forthcoming year, we pay particular attention to the impact of administrative costs on its operation.

As for the percentage spent on administration, I am advised that it ranges from about 5 per cent. to 12 or 13 per cent., depending on the organisation and the nature of the particular project. However, I am grateful to the hon. Lady and the other hon. Members who raised the issue.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee

The percentage range that the Minister gave us is very large. I am interested in this subject and the overseeing role played by the charity commissions. The Minister may have been a bit disingenuous when he said, ``It is up to the charities themselves, and to their trustees.'' The public do not know what is happening; charities are driven, after all, by people who work full time for them and are involved in administration. They draw salaries.

The wide range of administration costs is interesting and perhaps we might learn more on the issue—if not now, perhaps on Report.

Photo of Hilary Benn Hilary Benn The Parliamentary Under-Secretary of State for International Development

I give the hon. Gentleman the assurance that if he wants to discuss the matter further on Report, I will be happy to do so and to provide as much information as I can.

I did not intend to be disingenuous in saying that it was a matter for the charities themselves. I merely reflected the fact that they were responsible for their own governance. I accept the point that the hon. Gentleman makes about the extent of interest in the way in which charities operate and to what degree the money that they raise is spent on administration. Charities, however, are independent, free-standing organisations. The Government may say that it is in all our interests that organisations involved in development aid ensure that they spend as effectively as possible and minimise administrative costs. The Department for International Development is responsible for its own development aid, must demonstrate that that is being done and can encourage others to do so. However, it is simply a statement of fact that charities themselves have responsibility to ensure that the objective that the hon. Gentleman and hon. Lady have set out is adhered to.

Photo of Caroline Spelman Caroline Spelman Shadow Minister (Women), Shadow Secretary of State for International Development

It has been useful to debate this probing amendment, because I have learned from it something that I did not know. The range of percentages spent on administration is interesting, and if we had not had the debate I would still be in the dark on that fact. I do not know whether those figures are published anywhere.

Tantalisingly, at the end, the Minister said that there must be consistency between what the Government themselves do and what they expect third parties to do. It would be interesting to see a breakdown of the administrative costs of Government-funded initiatives. That would create a new degree of transparency, which would help to deal with the public's concern, to which I alluded, that their money is spent on the projects for which they intended it. The public accept that a reasonable percentage must be spent on administration, but they would find it interesting to know how the process is undertaken and what the outcome is.

I took on board the point made by the hon. Member for Workington about the need to strike a balance. We were originally asking for more diligent auditing of where our money went and what it achieved, recognising that that comes with a certain administrative burden. Of course that balance must be struck, but I would reassert that there is a need to check thoroughly how the money is spent. That will inspire the public to go on being as generous as they are and allow this country to enjoy a good reputation for providing aid effectively.

My purpose in moving the amendment was to initiate a discussion on the matter. We have done so, and I am satisfied. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 8 ordered to stand part of the Bill.