Mr. Gareth Thomas:
The UK has recently published a draft policy paper for consultation on the issue of aid conditionality, "Partnerships for poverty reduction: changing aid conditionality." This paper (produced jointly by DFID, HM Treasury, and the Foreign and Commonwealth Office) makes a commitment to reducing the burden of conditionality while recognising the continuing relevance of conditions. After a period of consultation, DFID plans to finalise this policy statement in the first quarter of 2005.
DFID supports a range of reforms to improve the way that public money is spent and accounted for, and the way that public services are provided, especially to poor people. We recognise the sensitivity and contested nature of many policy reforms, including the privatisation of public services. This highlights the need for careful country-specific analysis to ensure that reforms are appropriately designed, as well as strong country ownership of any such initiative. DFID's draft policy suggests that in future we should only support reforms where partner governments have had space to debate—including where appropriate in Parliament—the full range of policy options, and have made their own decision informed by clear evidence of the benefits to poor people. As the UK policy paper makes clear, aid terms and conditions must support, not "buy" reform.
To improve the quality of policy design and implementation around issues such as privatisation, DFID continues to press for increased use of analytical tools such as Poverty and Social Impact Assessment (PSIA). By mid-2004 some 150 PSIA activities were being carried out. The results of this work are already indicating the need for a more careful use of policies such as privatisation: both in the nature of the reform of organisations, and in the need to ensure that the social protection functions of these organisations are taken into account. DFID recognises that there is a need to increase the number, and to improve the quality of PSIA, and to ensure that the results of PSIA are used effectively in the policy process. The World Bank has committed to more careful consideration of the significant distributional consequences of policies that they support. This will include greater use of PSIA to inform the policy choice. The Bank has also committed to report at the next annual meetings in 2005 on progress in the use of PSIA.