Speaker:

Rt. Hon. Hilary Benn MP, Secretary of State for International Development.
Chair:

John Battle MP, Chair, APGOOD

Hilary Benn traced the origins of the international aid system to the post-war period, sixty years ago, and to the founding of both the UN and the Bretton Woods system. The new institutions had been designed to serve the objectives of human rights and the rule of law, peace and prosperity. They had served us well, but much had changed in sixty years. The world faced many new challenges, from globalisation and the emergence of new powers to natural resource scarcity, global warming and conflict within states.

Solving the new challenges should not mean adding new institutions, but making adjustments to the present system. Illustrations could be found in the fields of natural resources and in aid.

In natural resources, governance was a major issue: in Liberia, for example, $106m had been raised from timber in 2000, with only $6m reaching the Treasury. In Angola, $1.7 bn of oil revenues were lost each year. Support was needed for initiatives like the Extractive Industries Transparency Initiative and the EU forest trade initiative, FLEGT. A clear UN definition of conflict resources could help to control illegality. It was also important to involve new actors in these initiatives, for example India and China, neither of which was currently a member of EITI, though both were heavily involved in natural resource projects in Africa.

With regard to aid, the international system as currently configured was in a poor position to handle increases pledged in 2005:

1. Allocations were highly uneven (for example Mozambique received the same amount of aid as India). The multilateral system should help to balance things out.

2. The transactions costs were too high (for example, 80% of the 80,000 aid projects underway at any one time were for less than $1m; Zanzibar hosted 20 aid agencies; there were 28 UN agencies working on water; there were more than 90 global health funds). The aid system should be more selective, supporting funds when they worked and closing others down.

3. The multilateral system needed to be developed further. International problems needed international solutions and better collective action.

Hilary Benn called for a new vision, responding to conflict and disaster, improving global governance and supporting development.

With regard to conflict and disaster, the UN absolutely had to lead. It was particularly good news that 36 countries had now declared support for the Humanitarian Fund, contributing $250m. Support was also needed for the Peace-Building Commission.

On global governance, the UN also had an important role, alongside regional bodies like the EU. Priorities should include:

• wider membership of the Security Council, bringing in countries like Germany, Japan, India, Brazil and African representation;

• Better representation for developing countries on the Boards of the World bank and the IMF;

• Rules and merit-based systems for appointing the heads of the WB and the IMF.

In general, Hilary Benn thought there should be more leadership and louder voices from developing countries on these issues.

With regard to development, countries should be 'steely' in pursuing UN reform. The current reform effort was the best chance for a generation. It was being led by the UN. Donors should provide longer-term finance with less ear-marking, preferably on a ten-year basis. The idea of 4 Ones should be pursued; one UN office; with one Resident Coordinator; one programme and budget; and one funding mechanism. However, this needed supporting change at the Centre.

Hilary Benn emphasised that financing was the key: the way funding was organised could make change happen.

The World Bank was doing good work on growth but should also do more on equity and poverty reduction. It should respect countries' own plans and should deal with corruption (as the new President was doing) but in a balanced way.

The IMF was reviewing its role after sixty years and this was to be welcomed.

The Regional Development Banks had strong legitimacy and an important role to play.

EU aid was already larger than IDA and the EU would account for two thirds of all aid by
2010. This was important, but resource allocation should be transparent.

To conclude, Hilary Benn said that the priority was to put money where it was most effective. That required much better judgements about effectiveness. Should there perhaps be an independent body to oversee the aid system?

Questions covered a number of topics:

• The UK government was commended for ratifying the UN Convention on corruption.

• Questions were asked about trade barriers, debt and the special problem of fragile states.

• In reply to a question about the principles governing the respective shares of bilateral and multilateral aid, Hilary Benn talked about effectiveness, but also about the value of the bilateral programme in building a domestic political constituency for aid and the special virtues of bilateral aid (innovative programmes, leadership role, etc.)

• On UN reform, he repeated the point that the 4 Ones would deliver sustainable change if backed up by an integrated budget at the centre.

• There was a discussion about 'letting the bilaterals off the hook', and a special pleas to look hard at the effectiveness of technical cooperation.

• Interest was expressed in finding an equivalent of EITI to help deliver transparency in government procurement.

• DFID was asked to take a lead in quota and appointment issues.

• Progress in the UN was noted, although critical evaluation findings were not always followed by appropriate action.