I would like to start this, the first session of the International Development Select Committee on the FCDO’s approach to value for money. This is something that the Committee is very interested in, and I am sure the public is very interested in it as well. We have two panels today. Could I ask Stefan and Shamik to introduce yourselves and why you are witnesses in front of us and tell us what experience you are bringing? Stefan, could I start with you, please?

I am currently a Professor of Economic Policy at the Blavatnik School of Government at Oxford University. I was the chief economist of DFID between late 2011 and 2017 and I continued as an adviser to Ministers on and off until the merger and Dominic Raab.

I am Shamik Dhar. I was chief economist at the then FCO between 2014 and 2018. I left the FCO in 2018 to become global chief economist at Bank of New York Mellon. I retired last June but I have also had 40 years’ experience, roughly half in the public sector and half in the private sector. Hopefully that brings something.

Living the dream this retirement, lovely.

No comment. Yes, it is wonderful.

Shamik, could you tell us how you would define the term “value for money” in the context we are doing this inquiry?

It is, first, important to have a clear objective in mind, and value for money to me is delivering that objective at the lowest possible cost for the best use of public money. That involves fairly careful analysis and measurement, but ultimately it is about minimising the cost of inputs to get the output that you want.

Stefan, would you agree with that or would you add something to it?

No, it is very similar. The important thing that Shamik already alludes to is the importance of defining clearly the value. Then it becomes essentially what technically we would usually call cost-effectiveness, basically trying to deliver that objective at the lowest cost possible.

To both of you, but Stefan if I could start with you: the definition that you have given, did that change in your time as the chief economist?

I dug out DFID’s “Approach to Value for Money” document of July 2011. I think that is still relevant. There is not much controversy about it, but the definition of “value” changed over time.

In what way?

If you have a very straightforward simple objective, as by 2011 we were clearly still doing a narrow focus on poverty reduction, you have a very well-defined single objective, and you judge everything against that. Of course, it is multidimensional, so it could be in education or in health, somewhat similarly defined, but it was a particular type of outcome. I think from about 2015, with the budget and the Treasury’s development paper, we suddenly had multiple objectives, and we got into a world where occasionally secondary objectives seem to be more important than primary.

Shamik, same question to you, and you had the period in the run-up and during Brexit, I think.

Yes. It did not really change for me. I had arrived in 2014-15 which, as Stefan said, was when the Foreign Office got its first slug of ODA-related prosperity fund-related money. It did not change as such but certainly, at a higher level of management, the secondary objectives that Stefan is talking about became a topic of frequent discussion: what is it exactly we are trying to achieve here?

Do you put a little bit more meat on what a secondary objective is?

Throughout and because the Foreign Office had not been a big spending Department beforehand, when we got the £1 billion-plus worth of prosperity fund money in 2015, we were very cautious. We followed essentially DFID’s approach to measuring and assessing value for money. Of course, we followed the recommendations of the Act in all situations. There was an active discussion at the top of the Foreign Office about whether UK foreign policy interests should or could become a part of the assessment process. Certainly, Stefan and I had fairly frequent discussions about that. Can I just stress that at all times, though, during my period, the primary focus and the overarching focus was poverty reduction as defined by DFID?

I was in the Chamber when the then Prime Minister Boris Johnson came in and referred to ODA as the cashpoint in the sky. You had left at that point, I believe. What did you think when he said that?

I understood why he said it and certainly, when he was Foreign Secretary, we had discussions along those lines. I understood why he said it because it seemed sometimes as if this was money being distributed almost from nowhere. However, I do not think he focused necessarily on the detail of how that process was being conducted. What I would stress is that while I was there, it was a very exhaustive process at the micro level and, as I said, importing most of the advice that Stefan’s department had disseminated by then.

Stefan, money from nowhere; I would say it was taxpayers’ money going to support the poorest people in the world. What are your thoughts?

That particular example, I was by then back in FCDO just after the merger. It definitely baffled me because it was alluding to the Benazir Bhutto income support programme in Pakistan; probably one of the very few effective development programmes we were doing in Pakistan. This is a cash transfer programme. We know from all the evidence that we can have certainty of what the impacts of cash transfer programmes are. These are very direct support to the poorest people, well targeted. It was a very poor example to pick, but of course very deliberately picked.

Can I ask what you said on this muddying of secondary and primary objectives and how that filtered through to the culture of the organisation? Therefore, managers who were looking at value-for-money programmes and how they measured them.

Let me stress again that I think in day-to-day practice, in day-to-day assessment, it had very little impact because we were essentially following the rules, as was set down very clearly on the use of ODA money. We were very cautious and made sure that we were not exposing ourselves to any criticism from that side. What I meant was, I think at the time there was a big policy discussion going on among Ministers and senior officials as to what the purpose of ODA ultimately might be. It is ultimately, as defined in the International Development Act, about poverty reduction, but could there be secondary benefits that we could pursue, while not watering down the primary focus, that might have benefits or work in the UK national interest more broadly?

In some sense, it refers to the change in how you define “value”. It is important that a value-for-money definition, as it is used—and in all the documents it is used—is a form of most effectively delivering on a particular objective. It does not mean that it is the highest return for poverty reduction. You are not going to pick necessarily the programme in Pakistan that has the highest return from the point of view of poverty reduction. But once you settle on something and say: “Okay, that seems to be consistent with definitions. Primary and secondary seem to be aligned. Can we now make sure that we deliver it as efficiently, as effectively as possible?” So that is the boundary. The value itself, what you are going to do was much more liable to intense debate and we should spend more in that country on that programme. That is not necessarily choosing to start with the one that has the highest return to poverty reduction in a country, so it is the value part and how you define what is it that you are going to pursue is important. I have no doubt that in terms of the value for money, also our colleagues at FCO at the time were very careful. In fact, definitely, there were lots of ex-DFID or DFID people seconded supporting that process. But the issue is much more about what you are spending, not whether you were spending it in a value-for-money way once you decided that objective.

Thanks to both of you for being here. Shamik, going back to that point about those conversations happening when the merger happened. I would expect by now that foreign policy should be part of the assessment for any development work that is going out. Would it be possible to talk through how those conversations went, who are the dominant voices within that? Were they coming from the development side or from the FCO side? Where do you think that conversation is now? Do you think foreign policy is being included in the assessment process?

I should stress that I was not there when the merger took place but certainly, the conversation developed during my time there. I think initially, 2014-15, the Foreign Office was: “Crumbs, we have a large slug of money here. We had better manage it properly. Therefore, let’s use best practice”, and best practice at the time was exactly what DFID were doing. We strayed from that very, very little. What I was describing was a discussion that was going on among Ministers, several Foreign Secretaries, but also junior Ministers and senior management at the top of the Foreign Office, who felt that perhaps there was a role for these “secondary objectives”. I think Stefan has outlined it perfectly. The way I would describe it is that you have a primary objective that you are trying to maximise for the minimum amount of cost, but you may have some constraints, and those constraints changed over time. The discussion at the top was: “Could we not loosen the very strict definition of poverty reduction that was apparent in 2014-15?” During my time there, that did not really happen in any material way. However, the discussions were going on. I think now, since then, you are absolutely right. Clearly, the nature of development assistance has changed and foreign policy considerations, I think, do play a bigger part than they used to.

In a formal way?

In a formal way, I suspect. I cannot speak for those who are there now, but my suspicion is that they do enter.

To add one very small point.

How small?

Very small; on that side, but this is an area that I want to dig into. We had the Minister in front of us recently, and also the Permanent Secretary. I have asked the same questions. I still do not think that conversation has firmed up in any meaningful way.

That is not wholly surprising because foreign policy objectives tend to change over time, and they can be quite difficult to pin down, particularly as geopolitical circumstances change. However, the way I would put it is that I think a foreign policy objective may operate as a more important input, a more important constraint than it did back in 2014-15 when I started.

You have slightly answered what I was going to ask, which is it sounds to me that what you are saying is that value for money is not defined in terms of poverty reduction. Obviously, the International Development Act says that the purpose of international aid is poverty reduction. If not poverty reduction, then what goals and what do you feel was defining the goals of international aid?

To decide what the portfolio of resources of DFID are to be spent on, one ends up going through multiple layers. You choose a country. The objective function that is being maximised is not: “How do I reduce global poverty in the most effective way?”

It is not?

It is not. Because you begin to say there are probably about 30, 40 countries we are going to take specific interest in. Not for nothing—

Within that country?

Exactly. So you will get it later. Within a country, you will have certain choices. Certain choices will be made, say “We want to focus on education” and that is not necessarily starting from the principle of that being the main constraint on poverty in that particular place. However, there are lots of good things you can do in education. There is a particular level that I will have no doubt, in this entire period, all the way up to the merger, that there was a very careful consideration of: “Once we are more or less settled on the thing we wanted to do, let’s do it as effectively as possible with maximum impact on poverty reduction.” But it could involve choices, for example, in this period that people said: “Well, we should focus more on private sector.” So you had a whole series of programmes, including of prosperity fund, so the FCO said: “We are going to focus on working with the UK private sector if we can.” So these are constraints you put in.

You say “people” might suggest; do you mean “Ministers” might suggest?

Ministers may suggest, civil servants may suggest, yes. It is in their liberty. There is nothing unique about anywhere in the world that this would happen. In that sense, that becomes linked to foreign policy objectives. Value for money is, in the end, something much more confined to once you have set it on what value you are going to pursue, are you going to do it in the most effective way? That is what all the guidance said. It is not about going around the world looking for the best way of reducing poverty anywhere in the world.

Presumably, there is some theory of change that says that if we invest in education or if we invest in the private sector—

I am not going to doubt that, and it is not an exact science to say so. But there is a reasonable argument to make that private sector development will be a good engine of change in a country, or that education is a reasonable engine of change in a country. Our budgets relative to the size of these countries are still small so we end up picking bits and pieces where we feel like: “Oh, let us stand for this.” Over time, Ministers may have switched from maybe more focus on girls’ education or on health towards more private sector. I think it is reasonable, but that is not the same as saying that it—

Gentlemen, you are too interesting for this Committee. I have a very tiny supplementary from Brian, then I am going to start pushing you through the questions that we have if that is okay.

My question looks at one particular area, which has seen a massive drop over the last few years, and that is WASH. Again it comes down to the value of what you are doing because of course if you can provide water in a short distance you can save massive amounts of time for people. You could also do other things with agriculture. There are lots of different add-on benefits that can be hugely valuable.

The question here is that of course again DFID, or now the FCO, are not alone in the world of development. WASH is a particular sector that you could argue involves a lot of infrastructure development. With our grant money instruments as the only instrument that we have to actually achieve poverty reduction, grants are not the best way necessarily to build infrastructure, long-term loans and so on; this may be better. There is a reasonable argument that if your budgets are confined, you argue that maybe, for example, the World Bank should do more of that and it is there. We are just one player in a bigger system. But I take your point, choices end up being made every time. We say we will spend more on education, we end up spending less on something else. It is by the nature of the way we allocate these budgets.

This question is to Stefan. Thank you for giving us this very rich picture of how one might stray from this objective function that you mentioned at the start, maximising the impact of every pound spent. You have outlined DFID’s original framework is how you get there but can you give us a bit more of a summary of how you—this is very thorough, can you neatly summarise for us how you ensure the maximisation of every pound spent?

In a way you are asking me to tell you a little bit about the actual process and how it is done in practice. The theory is outlined in that document. One of the things that we got to by having this framework was that it created, first, much more push inside the organisation to be more evidence-based. If you are going to choose to try to be as effective as possible, you better check how effective evaluations, researchers told us that certain ways could be. It led very much to more respect for evidence. It led to an expansion also of the Research and Evidence Division that would gather research around how impactful, how we should better redesign programs, if we are interested in WASH how should we do it and what interventions worked, or not. It gave us a bit of that part. It became part of the culture, as in the first instance, being a bit more careful and to be a bit more critical in terms of saying, yes, there are lots of things if a Minister dreams up: “Let’s do a girls’ education programme”, that we have a better sense of which one should we do and which ones we should not do among these, how we should do that. A related thing is the business case process became taken seriously by all people. That meant people had to, whenever they proposed a programme, justify that it was consistent with the evidence, that the problem identification was correct, that the intervention had the best return for that particular objective, the best way of doing that particular objective. It led to a lot of work around procurement and better designing how we dealt and so on. It was a whole series of processes that I definitely witnessed in the six, or seven years that I was there. There was definitely a lot of improvement in the actual process. But if you think of it, it led to a culture where people really paid attention before they approved a programme. Do we think it will have an impact? Even today, in fact last week at an invitation from Norway: “Can you come and please talk about value for money and how DFID did it?” is that we were 10 to 15 years ahead of lots of other Governments that were trying to do it. This is something that gets “exported” even today in other organisations.

That is interesting to hear, given the complexity that you a moment ago outlined, and how you might end up perhaps straying from some of these more clinical objectives. You have partly answered my next question about how things evolved over time, but the difference, as I see it today, is that today you have a huge amount of data versus when this value-for-money approach was outlined. You have had a huge leap forward perhaps in the sophistication of the approaches of impact measurement and management, as you just described. Would you say that the FCDO became more supportive of more impact accounting or even a more econometric approach?

My sense is, with all the things that I described, that is a lot of process before you prove something, although critically the process tends to start when you more or less, as I was alluding to earlier, decide that we are going to spend on that thing in that location. That process. The first thing is a little bit, if we worry about straying, it is that we have so many different objectives now, and that may be worth exploring. Will programmes now be decided more because they serve UK growth, given that is the main objective of the Government, or something else? But that is again on what value are you going to pursue? Secondly, what I want to add to it, the weakness of all these things is that we are implementing all these programmes in very complicated settings, with very few people on the ground. These days we would say this needs to be complemented with a much more thorough understanding of how implementation happens, how can you fine-tune, how the feedback loops work in doing it. Similarly with any public expenditure in any place, it is not so much the design that has to be perfect but you have to be able to follow up and monitor and do the things. That is probably where there is still a lot of work to be done.

Would you say at least when you were there, but still today, you saw that the value-for-money assessment was very much secondary to those allocative decisions that had already been made?

No, when I was there, it was—I was there for a year and a half after the merger. But if I talk on the DFID time, no, it was extremely taken seriously. There were some allocative decisions and so on, but it slipped gradually. Then by the time of the merger, definitely within the whole—call it chaos of the merger—definitely a lot of these things were lost.

It is interesting to hear that shift. Lastly, how effective do you think DFID was at the monitoring process behind that?

One of the big challenges we always had is that for the amount of money spent, there were relatively few people on the ground. For example, GIZ, the German delivery people, I was told, had 18,000 people. We never had more than 3,500 people, including central government. The result is that we always had to do very large programmes, which then had to be getting, for example, management agents, including sometimes the big four and things like that—PwC, KPMG—running big development programme without development expertise, who then subcontract further and subcontract further. The scale of the programmes was high, and that created challenges for monitoring and especially for adjusting circumstances change. That was probably about the bigger implication for the actual value for money than anything to do with the design. The design was definitely state-of-the-art.

And you were able to monitor the development of these overheads, whether internal or external?

Do you mean when we had to outsource these things and so on? No, I think that is probably where—it was done as carefully as we could. But that is extremely hard to do. There is definitely room for improvement. We need to find better ways of delivering. But that is not a problem that DFID accounted for. It is a standard one. Maybe the main thing to clock is that the value-for-money approach here described is very much ex ante. Then there is the reality of delivery. You need to keep on having good people. This is something I am concerned with, that after the merger those people who were experts in delivery on the ground, the capability in the development part of FCDO, definitely got dramatically weakened. We have more and more people in the merge system who made decisions of monitoring money, allocating money, that are maybe excellent diplomats, but never were trained in monitoring and evaluating money. I would say that is one of the areas that I would suggest is worth looking into it. Is, at the moment, this whole delivery chain still able to get a sense of real value for money, or what needs to be done to improve that? Because there are so many people in the delivery chain who arguably are not trained or do not have experience in handling these relatively vast sums of money.

A quick one: with the move to giving cash to individuals as a way of giving aid, possibly with cards, theoretically that would be a way in which you could really monitor right down to a micro level. Where that money is being spent could provide a huge amount of data in terms of what people are spending that money on and whether that is going into just immediate needs of buying a loaf of bread or whether it is going into clubbing together to make sure the pump is repaired or whatever. Has there been any thought about that going forward?

I should not do this, but I almost put it back as another question: is this how we monitor UK spending in Sheffield from here? I am not sure we do. We are now doing this in outside countries, often in conflict, often with very fragile Governments where we have to do. It is not straightforward to do this. So there are a lot of attempts to use data and so on to do this better. But we are still a little bit away from where you are. It is a work in progress, but I would say it involves all public expenditures of Governments, whether it is in the UK or overseas and we could do better in that respect.

How did DFID adapt its policies for humanitarian responses to maintain, or could it maintain, value for money?

I used to say inside DFID, the humanitarian sector is an evidence-free zone. Humanitarian organisations are not the most transparent in allowing people to do the research, to do the evaluation, to get the data in terms of what works and what does not work. Humanitarian principles seem to be always averse to: “We better get to know what is happening.” There was an issue of data. In fact, one of the things that DFID did very effectively, we started investing in research on the humanitarian sector. In my side of a profession in economies, but also other areas, health research, there is so much going on now in the humanitarian sector. For example, one way of adapting this is that the bits of evidence we started gathering in an awful lot of settings, food aid is far less effective than cash transfers. This was one of the things that DFID at the time pushed through and convinced other organisations to do it. We then actively took the lead, I think, on trying to bring evidence into the picture. That is a form of adaptation. If you do not have the evidence, it is very hard to do it carefully, but then at least let’s invest in that evidence. The whole cash movement, where we wanted to make sure less based on food data and much more on cash, it has entirely come from that period, and you could say it was driven by we know it has higher return for the same amount of money.

Shamik, I wonder if you could comment a little bit on—we are thinking about return on investment so if you have been investing in a scheme for several years and then you withdraw the funding quickly—we had examples of training projects for women and in the final year, when they were going to do the evaluation and get the qualification, the funding was withdrawn. Is that taken into consideration when decisions around value for money are made?

Generally speaking yes, though it probably could be done better. There are Green Book diktats that suggest that you need to plan for the life of the commitment, but also you need to plan for transition as well; what happens at the end of the supposed lifetime of the project and assess some of the costs involved with either withdrawing money very quickly or rotating it into something else. We always paid attention to those costs, but I would say that they probably were more uncertain and more difficult to assess than the standard what bang per pound are you getting for doing this instead.

We potentially have two votes, so can I ask both the witnesses but also Committee members, can we bang through these questions? If we cannot get to things, could we write to both of you because we appreciate the answers that you are giving.

I want to look at the distinction between DFID and the FCO and their relative levels of performance. I think we are all here saying and listening to the fact that you would say DFID was a top performer. The FCO, by comparison, was rated one of the least transparent spenders on foreign aid, 38th out of 47, as late as 2020. Can you explain to me why the two are so different? We have merged them and I think we have gone backwards rather than, to be honest, keeping the DFID standard. Why was that? What was different that was happening in the FCO versus DFID?

There are a couple of reasons. First, the FCO was a lot smaller. The FCO’s budget at my time was about £1.5 billion, something like that. DFID’s was about £15 billion, something like that. DFID was about 10 times bigger and had more resources being thrown at it.

That is easy therefore to demonstrate value for money with a smaller budget.

I would say when you are thrown a large slug of money, which is broadly speaking the equivalent of your existing budget, you inherit a workforce that is not necessarily best placed to deal with that money. I think there was a learning process. My unit performed—I would say this—very, very well, not just in assessment but in education. One of the things I would draw is that we need to make sure that there are economists throughout the FCO in order to make sure that this stuff happens properly going forward.

Gentlemen, I am really sorry about this. I think you can see how engaged we were with the evidence that you were giving, so if we could follow this up in writing, we would be incredibly grateful. Committee, I think there might be two votes. If we could come straight back and then we will start the second session then. Witnesses: Dianne Stewart, Jennifer Armitage and Abdoulaye Fabregas.

We are restarting the International Development Select Committee session on the FCDO’s approach to value for money. We are now going to turn to our second panel. We have Dianne Stewart in the room. We have Jennifer Armitage and Abdou, who is virtual. Abdou, could you introduce yourself and the organisation you are representing, please?

My name is Abdoulaye Fabregas. I work at the OECD Development Corporation Directorate in a unit that looks at the big picture of development finance. A big part of my work is looking at multilateral development corporations where we look both at inflows to the multilateral development system, so how donors fund multilateral organisations on development issues, and then also the outflows—how these organisations use the resources that are entrusted to them.

How do you and your organisation define value for money?

We do not have a specific definition in our directorate for value for money in development co-operation. I would say that we are often tempted to adopt a narrow quantitative definition, which would be making the most of limited resources, so looking both at the cost and benefits of a development intervention and how much is invested in the ground, compared to how much a donor has contributed. But we try more and more to look at the qualitative considerations and see whether a development intervention also responds to the needs or the issues that they are trying to solve. Things like how is it targeted. Is it targeted or is it susceptible to achieve the most transformative impact in terms of country focus or sector focus? Is an intervention sustainable? Are you building capacity at the same time so that you do not have to redo the same intervention at a later stage, and also the timeliness of the intervention?

Thank you. Jennifer, could you introduce yourself and your organisation, please?

Good afternoon. My name is Jennifer Armitage. I am an applied health and social economist, and I am currently based in Nairobi. Over the last 20 years, I have worked as a consultant with FCDO, the UN and before that the NHS and the Home Office in England to improve the efficiency and effectiveness of public services. I am currently director of LAMP Development, an Edinburgh-based organisation, not-for-profit. We combine analysis and practical advice. Our vision is that everyone has confidence that aid money is spent wisely and not wasted. I set up LAMP over 10 years ago. I was living and working in Nigeria. Since then, LAMP’s largely global south-based teams have led value-for-money reviews over 20 UK-aid funded programmes, 15 countries, combined value of £1.2 billion. We are currently supporting health and education programmes to implement value-for-money approaches across 11 countries in Africa and Asia. Outside of LAMP, I have held a number of positions relevant to this inquiry. I was a consultant on UNICEF WASH education programmes in Nigeria, with the evaluation and learning component of a health programme in Sierra Leone. I was a technical expert on ICAI’s performance review of DFID’s approach to VFM in 2018.

Thank you. Does your definition of value for money differ from the FCDOs or is it the same?

I can answer that question by making about five reflections but I am not sure whether you want that long an answer. I can go on and you can tell me if you need to move on. May I start by saying that I have seen first-hand the positive impact of the FCDO framework on improving the use of ODA at country and programme levels. Given the shifts globally in ODA at the moment, we welcome this review of the framework. It has served as an important defence of UK aid and demonstrated UK leadership in ensuring that taxpayers and citizens of countries that receive ODA is being well spent and not wasted. So it has been useful. We do share the definition of making the best use of resources to improve people’s lives and while we also align with the primary aim of poverty reduction, in practice there are multiple objectives, multiple priorities, that guide decisions. They are now more explicitly outlined in FCDO’s outcome delivery plan, such as tackling global challenges, responding to humanitarian crises and supporting sustainable development goals and others, as I am sure you have been discussing. What I want to say is that given these multiple aims, a simple calculation of return on investment using traditional economic approaches will fall short, and that is why we think the FCDO framework is so important. I can go on to give some examples of how we have used the framework in practice on programmes, but I am happy to do that because you want to—

Jennifer, I wonder if you could answer the question that I asked, which is: do you use the same value-for-money framework that the FCDO does, or is yours different? If so, how?

We have supported programmes implementing FCDO-funded programmes, and we support them to apply the FCDO framework in practice. We work with them to come up with their own definitions, but we use the four Es or five Es. We use the principles of value for money. We run training on the framework with the programmes to build an understanding of that framework in practice. We are all about how do you apply that framework in practice.? Yes, is the short answer, but it is also adapted for the specific context and for the specific programme.

Great, thank you. We have also received your written evidence. Anything that you can give us in this session that is above and beyond that would be appreciated. Dianne, could I turn to you? Could you introduce yourself and tell us what value for money means for your organisation?

Thank you very much and thank you for having us this afternoon. I am the deputy director of External Relations at the Global Fund to fight AIDS, tuberculosis and malaria. I currently serve also as the head of Donor Relations and I run our replenishment process. I have been previously at the Global Fund since 2002. I was there seconded from my role at UNHCR to help set up the organisation. I ended up staying until 2009. I then went, as vice-president, to the International AIDS Vaccine Initiative, where I worked for several years, and then was external relations director at UNFPA, working on women’s health issues, and helped to set up the global financing facility at the World Bank. In 2017 I went back to the Global Fund and was delighted to take up this role. The Global Fund, you may be aware, is the world’s largest provider of grants for health programmes in low and middle-income countries. We operate in over 120 countries, primarily funding programmes for AIDS, TB, and malaria, and for health systems. I think it is important to understand our scale when we talk about value for money in the context of the Global Fund.

Can I ask you to focus on value for money because we are quite pushed on time?

The value-for-money framework that we use is very much associated with the DFID value for money. We use the same efficiency, economy, equity and effectiveness framework that was referred to earlier that DFID had adopted in 2011. But I think there are some elements that are unique to the Global Fund that I can point to that describe particular value for money. One of the things the Global Fund focuses on is how effectively do we reduce the burden of AIDS, TB, and malaria on the countries in order to generate both efficiency and effectiveness in the health system for those countries but also a return on investment in an economic way. The way we do this is by ensuring absolute effectiveness of the development assistance financing. There are several ways we do this and I think I will focus primarily on our methodology as opposed to our model. I am happy to answer questions on the model. First, we have allocative efficiency. We are in 120 countries. How do we ensure that we allocate the over US$5 billion that we spend every year most effectively to the countries that use that money? We look at the burden of disease, their ability to pay and then we allocate the money across the portfolio in a way that will produce the most impact in those countries. We then have technical efficiency in the way that money is spent. We have over 96% of expenditure of those allocations in those countries, which means we are allocating to the right places and those countries are able to efficiently use that money. That is really important. We also have a technical review panel that ensures that our programmes are evidence-based. We have an independent review, “Are you doing the right things and is that money being spent in an effective way?” There is a performance framework, so that is why I am able to tell you that we have saved 63 million lives since 2002 because the performance framework tracks everything we spend, exactly what that impact is and you can draw that directly back to the programmes for HIV, TB and malaria. We have effectiveness and efficiency built into the performance framework in every single country that we operate in.

Right. Let me stop you there because we will have some specific questions coming forward but I want to ask other people. James, over to you.

I will start with Abdoulaye, if you do not mind. We talk a lot about bilateral and multilateral aid and the appropriate balance between the two. From the OECD’s perspective, how do you see the importance of multilateral aid and the effectiveness of it?

That is something that we study in different types of analysis that we have conducted. One of them is looking at the comparative advantages that we see for multilateral aid compared with what can be achieved bilaterally by our members. One thing that comes out of our analysis is that if we had to summarise what is required to address global challenges today we would summarise it with money and in that sense we think also that the multilateral system has a lot to offer there with its multiplier effect, for example allowing donors to pool resources so you can get other donors to contribute to your priorities. Also there is a multiplier effect because you capitalise on some multilateral organisations’ capacity to leverage, meaning that for each pound that you invest you know that the multilateral organisation will be able to use more pounds on the ground. Money is the first comparative advantage. The second one is knowledge, obviously the specific expertise that multilateral organisations have developed over time. I think a good example of that is the financial intermediary funds or what we call vertical funds with a very specific schematic focus with specialised expertise on precise topics and also because the multilateral system allows recipient countries to learn from each other and also exchange knowledge and information. Besides money and knowledge, the comparative advantage we see is on sparking corrective action. We often talk about the convening power of multilateral organisations and the fact that they can be helpful in co-ordinating and monitoring their members’ commitments. Based on all this we see that there is value for our members to invest in the multilateral development system. Another type of analysis that we conduct looks at the effectiveness of both bilateral and multilateral development corporations and what comes out of the conclusion of this analysis is that we see that in a lot of cases, multilaterals tend to score pretty high in terms of their effectiveness, even if we compare them with what our members do bilaterally, whether it is in terms of predictability of their aid flows to the recipient countries, in terms of use of country systems, for country ownership and also in the fact that they help reduce fragmentation on the ground. These are two types of analyses that we do.

So if you just flip that then, those are the strengths of the multilateral organisations. What should we be achieving through bilateral aid that the multilateral approach cannot achieve?

A trend that we see is that more and more of our members, so the members of the Development Assistance Committee are channelling more and more of their ODA through the multilateral system. The reasons for that that we have seen in the data are, first, more crises and crisis response being a more important part of their ODA flow and in a lot of ways the multilateral system we see has also some strengths in regard to humanitarian assistance, being able to leverage their logistical and procurement capacity quickly to respond to crisis. The second one is global or regional interventions. We were talking about global challenges, so addressing or supporting global public good is the reason why we see our membership going more and more through the multilateral system. This does not mean that everything must be done multilaterally and we think that depending on the donor the importance is to be able to leverage your expertise and your own strengths. In that sense value for money could also mean ensuring that you do bilaterally development interventions when you have country presence, which means that you have a good knowledge of the local context, you have specific schematic expertise and if we look at our members we can pretty easily see in terms of sectors where lies the expertise of each member. For the United Kingdom, for example, from a quick glance at the data that we have at the OECD we could see that social infrastructure and services is something that the UK is pretty strong on bilaterally and so obviously for us that means that the UK is probably using the multilateral system to do other things that it cannot do itself, whether it is more focusing on the economic infrastructure or the production sector and the like.

A final question from me. You mentioned trends going more and more towards multilateral over bilateral. I think that is what we are seeing here as well. I think the FCDO has us up at around 42% of the Department’s ODA budget now being spent through multilateral channels and 33% through bilateral spending. Does that balance feel about right to you? Is that broadly where other countries of similar size are? What is your perspective on that 42% figure?

It is pretty similar to what we see in the DAC average. Obviously, as you say there is a lot of variation across members depending on their size, for example, and also on whether they are a member of the EU or not because obviously that forces some of them to go through the multilateral system whether they like it or not. Overall this is what we see. For our members in 2022 43% of their ODA was channelled through the multilateral system and to be a little bit more specific within this 43% we distinguished two types of flow or contributions. One is what we call core contributions to multilateral organisations, so contributions that our members make to multilateral organisations and that the organisations can use as they see fit within their mandates, and the other ones are multi bi-aid flows, so these are bilateral aid flows officially in our statistics except that they are earmarked by our members that say, for example, “This trilateral agency has to use it for this specific programme or project.”

Abdoulaye, just looking at multilateral and bilateral spends, roughly what is the maths used when it comes to staffing allocation of costs?

Could you repeat the question?

Yes. When you are looking at how spending is divided between multilateral and bilateral how is the donor country’s staffing costs allocated? Obviously a large proportion, one would imagine, of the multilateral staffing costs would be incorporated in the multilateral itself, whereas a bilateral might have more intensive donor country staffing costs.

To be honest I do not have the answer to that question. I think it is a very relevant one. I will check but I think we could find an answer to this question in assessments of multilateral organisations’ performance that are carried out by MOPAN which is an entity hosted by the OECD which does performance assessments of individual multilateral organisations and they look at the detail of the operational framework of each institution including their human resources. I am happy to look at it and send something written.

Thank you. If work is already done and you could pass it on, that would be very interesting.

This is a question for Jennifer. Can I ask you, given that a donor country will be removed from the outcome of a multilateral spend how does that align with their objectives regarding value for money?

I am sorry, I do not understand the situation.

If a donor country such as the UK is predominantly now giving to a multilateral fund the outcome therefore is removed slightly from their objectives because it is a multilateral spend. How do they then track a long-term outcome on the value for money scale to their own policy objectives?

I see. So Abdoulaye just mentioned the MOPAN assessment there so there are ways that FCDO already funds MOPAN as part of that, and those MOPAN assessments assess the alignment of multilaterals’ objectives with the UK’s objectives. That is one thing that can be done. It was something that was done in 2016, whenever the last multilateral aid review was done. It is possible at that stage, so prior to programming you can see that there is alignment between a multilateral’s objectives and the UK’s policy objectives but it is weaker. That is one of the disadvantages of multilateral versus bilateral. The multi-bi that Abdou talked about there is a bit closer, so you can have a multi-bi which is a multilateral organisation, say UNICEF, in implementing an education programme in Nigeria that is funded by FCDO and there there is more opportunity to set that programme up to deliver the objectives of FCDO such as improving access to education for girls in northern Nigeria.

Could you talk about the value for money benefits of flexible funds, such as the Integrated Security Fund?

I can do. I know a bit less about those, but a bit more about rapid response within health. I work more in health. Of course these funds are more flexible and so therefore time responsive to crisis. That is one of the advantages of them.

Sorry, Jennifer, but can I just jump in and ask, you mentioned there the multi-bis. What do you think the perception is of that approach where money gets tied up within an organisation for a particular country? Is that generally perceived to be a good thing or are there disadvantages to that for those larger organisations that have their own agenda? How firm do you think the FCDO should be when it comes to using things such as multi-bi approaches?

I can talk from the perspective of implementing the value for money framework in that context but I think first it is important to say that it is a good thing that there are these different options, these delivery channels, and that should be considered at the programme design stage. It should be dependent on the country, the country context, the delivery risks in that country so all those decisions are taken in the programme design stage, the business case stage. If it is seen as advantageous because for example the implementing partners in Sierra Leone available are the multilaterals and they are the best versus contracting private contractors as management agents, then that decision is taken. There is an element of that being considered at the design stage. When it gets down to that decision of a multi-bi arrangement and implementing the FCDO’s VFM framework I can share a few experiences of how that has played out in practice. Essentially there are reporting requirements between multilaterals and the UK that set out MOUs and to change any kind of reporting practices on outcomes, funding, specifically we want to get a unit cost for this, training cost in this place, that is difficult because the financial systems in the multilaterals are not set up to serve the needs of the funder in that way and there will be pushback for sure. I am happy to answer any further questions.

Going back to Abdoulaye, I want to pick up on the multi-bi. First before I get to my question in terms of the percentage that we just discussed, in terms of 42% going through multilateral channels and 33% through bilateral spending for the FCDO within the multilateral spend is there a normal split that goes to multi-bi versus multilateral?

By “normal” you mean—

An average. You gave us an average for your members for those two general buckets but is there also an average for the split of multilateral aid?

Yes, we do have the DAC average. It was 21% in 2022 and maybe something important to note is that this share has been increasing over the last two decades. When I was saying that more and more ODAs channel through the multilateral system that is in volume and in share but what we see is that this does not mean that the share of core contributions increases. Rather, it is this multi-bi aid that increases a lot. Again crisis response is probably one of the things responsible with the refugee crisis, the different crises that we have seen, as it is often seen that multi-bi aid is an easy way to set up new funds for specific purposes, covid, Ukraine, and so on. At the OECD there is an ongoing debate at the DAC on the use of multi-bi. In the past, I am talking 10 years ago or so, there was a lot of criticism of the use of multi-bi because it was seen as a bilateralisation of multilateral aid, meaning that donors imposed their priorities to multilateral organisations. Today we are more nuanced and we tend to encourage the use of flexible funds, so multidonor funds rather than single donor funds, pooled funds that allow different UN agencies to draw from the same pool of funds for schematics and the like. Again, 21% is nowadays the multi-bi in 2022.

And building on that, I think in your 2022 report the OECD said that to be most effective multilateral aid needs to be aligned in terms of a development portfolio of funding. Can you explain why it is important that the bilateral and multilateral portfolio are similar?

Yes. We are not pushing for them to be similar. We are trying to push them to be complementary. This is a bit difficult to define what we mean by complementary but what we mean is basically we think there ought to be a logical division of labour between what is done bilaterally and multilaterally, at least at the level of our members, of the exec members. So for example the UK, we encourage our members to have a reflection about the country presence, the expertise, existing channels with their development partners, where they think they can implement these the most efficiently bilaterally versus where they think that it could be done at the multilateral level. For example, if you are not already present in a country, rather than creating a new development channel we encourage them to go through the existing ones. If there is already a multilateral doing this type of work in this country we would rather they use it, so there is no more fragmentation and transaction cost for the developing country.

Just briefly, because you mentioned the UK, so in terms of the analysis that you have done of the UK’s portfolio do you think in terms of that complementarity it has the balance right? Is it working effectively?

Again what we did is we were looking more at the DAC level and then we tried to outline a little bit the different strategies that we saw at the level of our members. For the UK what we saw is that multi-bi aid, so the UK’s multi-bi aid, seems to target a very similar geography, so the same recipient countries as the direct bilateral aid, meaning that it uses aid channels through the multilateral system to support countries where it already has a bilateral presence. That is very similar to other DAC members, for example many Nordic countries, Australia, Netherlands but at the other end of the spectrum are countries such as Spain or Japan that tend to use multi-bi aid to intervene in countries where they do not have a country presence at all. It is all a matter of them reflecting internally within their country. That is why we try also to encourage our members to articulate this complementarity within a strategy, whether it is a white paper or a multilateral development aid strategy, where they can explain what they think they should do bilaterally and where they think the multilateral system is best placed to intervene and also to avoid duplication and inefficiencies.

Dianne, if I can come to you. How does the Global Fund ensure that it is delivering good value for money for its donors?

As I mentioned we have a process in which we approach our value for money allocations and so on but I think the biggest piece that we provide is impact at scale. What we mean by that is in relation to the conversation you are already having, what is the most effective way that we can pool donor dollars to have an impact collectively across countries and where it is needed most, so sometimes in the poorest countries in the world we have very heavy disease burdens and potentially lower capacity to achieve things but also where we think we can make the best use of the funding to have impactful interventions. What we do is as you said allocate that money efficiently but then also we can pool that money for pool procurement. One of the most efficient things we do is to help countries procure at scale medicines and products for HIV, TB and malaria that they would otherwise not be able to get at that price or have as efficiently delivered to the country because they do not have the kind of market-shaping ability that we do. To give you an example of that over the 20 years that we have been buying antiretrovirals for HIV the price has gone from US$10,000 a year to $45 a year. You can see the efficiency of that not only in the price but in the scale that you can achieve if you can use the money for greater volumes to deliver in country. The other way in which we save money for donors is particularly in reducing the burden of HIV, TB and malaria on the health systems in country. We deliver two things on that. First, you free up space in the health system to do other things and we have been able to quantify that. Our assessment, for example, of our HIV investments up until 2023 found that they had freed up over 1.6 billion hospital days and averted 1.3 billion outpatient visits. You can see how that makes capacity in the health system to do other things. We also can quantify the return on investment, so for every £1 that is invested in the Global Fund, the economic returns have a monetised intrinsic value of £19. That is very direct and if we calculate the productivity gains, it is £6 of productivity gains in real terms. These are important ways in which we are efficient. You talked earlier about operating expenses and other things. The Global Fund operates at a rate of 6.2%. If we check with our colleagues at OECD DAC you will find that is incredibly low for the multilateral system. The other way in which we are super-efficient in relation to the conversation you have just been having is the ways in which we can also shift funding in our portfolio to respond to crises or other things. If money is not being spent in a particular portfolio because things have slowed down or the country itself is not managing to move the money we can reallocate through a process we call portfolio optimisation. We can reallocate that to areas of the portfolio that do need more investment, whether that is in response to a climate crisis or a displacement of civilians and so on. We are constantly reassessing where our money is working. We are subject to all the reviews and you asked particularly about how to measure value for money in a multilateral system. We report on that to FCDO. In the latest annual review that FCDO did they gave us “excellent”. We also get A grades, we are very proud to say, but we also received an A grade on the value for money indicators. Those are indicators that are part of our portfolio, part of our performance framework and we can report on those directly to donors. One of the ways that is efficient for the countries we work for is that we agree on those indicators and then the countries know what is expected for them. They are the ones who implement it. Although we are a multilateral organisation our model makes sure that everything is locally owned and locally implemented. That is another way we can evaluate what is happening, report back to the donors in ways that they can track to their own political objectives or development objectives because we have a wide portfolio so you can look at the countries that are of interest to you and you will get the data for that country and you can track that and the value that you are getting out of that, but at the same time there is that overall portfolio efficiency. We are constantly reviewed by MOPAN, 2022 was the last time that we had a MOPAN review and it gave us a very positive review and complimented the Global Fund on the way that although we are in some ways originally designed as a vertical fund to do HIV, TB and malaria within health we were complimented by MOPAN for the way in which we have integrated our services into the health system. We respond to what countries want to do with that money; there is a lot of flexibility in that but we can still show how we deliver on that. I can say more about sustainability but I will stop for now.

So is that your pitch going into the replenishment in terms of the value that you offer, or is it wider than that? Abdou brought up the issue of expertise as being part of a package in terms of we have heard that the Government have scarce resources and when they have to make a decision on the replenishment of the Global Fund that there are things that must be taken into account in that regard.

Absolutely. The pitch that we will be making and we will be launching our investment case next week is very much designed to say what the impact is that we can have with the money that we hope donors will give us over the next three years. The impact we have had to date is measured in lives saved but it is also measured, as I have explained, in the reduction of the burden of disease. Our pitch is very much that this is the most impactful way you can invest health funding because it helps countries reduce the burden of those infectious diseases but it also, and we are investing upwards of £6 billion in our current grant cycle, strengthens health and community systems. I am sure we all recall how in a pandemic your community systems and the trust that your communities have in your health system are vitally important. That is part of the pitch. The other point that we need to make is what does this bring to the economies of these countries? What is the knock-on effect of investing in health? This new investment case has a huge amount of economic data in it in terms of the return on investment you get from that but also we have quantified the increases in life expectancy that we can track and that we will continue to improve upon. I will just give you one example. In the 20 years since the Global Fund has been investing in health funding in Zambia we have increased life expectancy from 42 years to 58.4 years. That is over 15 years of increased life expectancy, two-thirds of which is directly attributable to the reduction in the burden of HIV, TB and malaria. You can imagine what that does to the structure of a society. You have grandparents where you did not have grandparents. You have people investing in longer education because they live longer, they can work for longer and they are more economically productive. That is our pitch, that this is a vital way of improving the economic experience of countries and that it is one of the most efficient ways of getting your money to those programmes.

From the UK’s perspective those are incredible things. How is the role of the UK seen by those who are benefiting from the investment that is obviously being made by UK taxpayers? Is there anything to show and to see or are these just programmes that are being delivered through the Global Fund?

Because the Global Fund’s programmes are very much locally owned we do not go around sticking Global Fund stickers on anything. The Global Fund itself is a partnership, very much an equal partnership, so the UK sits on the board alongside 10 other seats that are all the implementing country seats. Those countries sit across the table from the Global Fund and decide how these investments are going. The role is very visible. The UK has also played a very influential role in our governance in terms of the ways in which decisions are made, the value for money framework itself was very much driven by the UK through the governance mechanism and is why it is in our performance framework. I think that is very visible. I would make one other point. Certainly with DFID before and still now with the integration in FCDO there is a complementarity with expertise that the UK has and it is one of the big strengths of the UK, that expertise in development. That expertise that sits at country level helps from a technical assistance point of view in implementing the funding that the Global Fund funds. That is visible at the country level too. I think there is a great complementarity to the point that Abdou was making around how some of the bilateral support leverages those big multilateral investments to be more impactful.

When we talk about soft power for the UK, which is something that people do value coming out of this type of spend, for the people on the ground they would not necessarily see the UK. Would that be fair to say?

They do not see a Union Jack, no.

A British flag. It is very crude but—

The Global Fund is very well known by leaders in all the countries where we invest.

By leaders but not the average person on the ground.

The communities that work with us, we have the voice of civil society communities and health ministries on our board so, yes, it is very visible because the voice is very strong and it is a top donor to the organisation. Everybody knows it.

I thought you made a very powerful point about the economic benefits of saving lives and prolonging life and healthy life expectancy. First, with the Chair’s permission, could you share that data with us to go into this report? I think that was very helpful. I also wonder if you do any modelling looking at the macro level on the impact of the fund on the suppression of disease and then also the cost of doing nothing. I am asking this not so much with the Global Fund in mind but with Gavi replenishment in mind to understand what the potential cost to the world could be if we fail to invest in disease prevention.

Yes, we have quantified a lot of those figures. I am a little frustrated because our investment case comes out next week but I will send you that because it has all the updated figures. Some of the things I was talking about in terms of productivity gains or some of the counterfactuals on the cost of inaction we also have modelled a lot of those both in the past and in the new investment case, so I will be able to share fresh figures with you in a week. I think it is also important to realise that if we have 25 million lives saved from HIV, that is 25 million people who are on antiretrovirals, then you can see how important it is to continue that. There are still 9 million people in the world who need antiretrovirals and are not on them, so those people are going to die unless we can get them into those programmes to get the treatment. Then we must prevent those new infections. We know now what the cost is of keeping people on antiretrovirals for their whole life. We have very effective tools now to stop them getting infected in the first place so we can quantify exactly what costs we will save if we can prevent those HIV infections. We are hoping to roll that out as part of our next three years, those new long-acting prevention tools for example and several other innovation tools. We have quantified the opportunity of those new tools in our new investment case and we can give you those figures. I think we also saw very quickly during covid how fast a pandemic can impact economic activity so we are also able to model those things. We can provide you with a lot of that additional information.

Given the efficacy that you have outlined of the Global Fund and your value for money five-star rating that you also outlined, which was excellent, do you feel optimistic about the replenishment from the UK?

We think we meet all the criteria for the kinds of investments that the UK should and hopefully will continue to make. We also think that it is a great showcase for UK innovation, research and development. A lot of the new things that we are able to implement, value for money was one of the programmatic and policy issues, but there are a lot of research and development innovations that we are hoping to scale up with the help of UK science, technology, treatments and so on. It is not just that we need the UK’s money, which of course we do need, but we need your expertise, we need the science and we need the development expertise as well. It has been a big driver of success over the last 20 years and we hope that that will continue.

Can we come to the point that you were volunteering previously on sustainability, which is one of the criteria you set out but which the FCDO do not currently set out in their objectives?

We see sustainability as one of the key elements of value for money, of course because as we drive down the burden of disease, as we have said, we create a more sustainable health system, so that is obviously logical but there are more elements within that sustainability that we are driving that we think are important. One of them is what I just mentioned in terms of rapidly introducing new technology. If there are cheaper ways to do things, if there are more effective bed nets, if there is a prevention technology that will stop people from getting infected with HIV in the first place we think that part of sustainability is quickly getting those tools to scale so that you can reduce the burden of disease and it will cost less in the long run. We are also catalysing domestic financing, encouraging countries to give more of their domestic financing towards those programmes and supporting national sustainability and transition plans so that people do not need to rely on development assistance in the long term. These are important elements of what we do. We also think that our model of involving communities and civil society is one of the key elements of sustainability that is an important part of our model that not all multilaterals can mobilise in the same way that we do. We think that is an important piece of sustainability as well.

Given the amazing results that you have had—and I am thinking now about the massive threats that exist from the USAID and all of that—is there perhaps a way in which your results can be portrayed in an more easily understood version so that it can be sold better, perhaps? I think it is a vital threat at the moment. You are obviously thinking rapidly at the moment about what on earth you do but perhaps that might be something worth thinking about.

Yes. I think we are thinking through what the arguments are for development assistance, investments at all. There is a humanitarian and ethical argument about if medicines are available in the wealthiest countries in the world why should they not be available in the poorest countries in the world. Why should you die of preventable diseases in other parts of the world? Those are moral arguments that we still think are important to make. The economic arguments are particularly important. There is a return on investment as I have described for the countries themselves, which makes them better markets and makes the world a more stable place. I am South African. We were very aware 20 years ago that the very stability of society was threatened by the rapidity of the HIV crisis in the country. You could say the same for many of the countries that have massive malaria burdens right now where their children are dying in unacceptable numbers and they do not even get to their fifth birthday. All these things are the things that drive instability and challenge in countries and then in the world. There is a national security issue around ensuring that other countries are safe, secure and economically productive. We are thinking of all the ways in which to make those arguments. The powerful arguments I just made around science, technology, and innovation are important. You also need to be able to scale-up innovation in the places where it counts the most. In the UK, in the US, in much of Europe, there is a lot of research, development and innovation of tools that are massively important for the world. Why would you not want to use them in the countries where they would make a massive difference to their economic, political and security stability? That would be the argument.

Of course the Global Fund is lifesaving and we appreciate all the work that you do. Thank you.

Thank you, Dianne, Jennifer and Abdou for being with us today. Let us flip it to the other side and look at the role of the UK within multilateral organisations. I will go to Jennifer. From your perspective, what mechanisms do the FCDO have to ensure that value for money is being achieved through its contributions to multilateral organisations? If you can bring it to life with a few case studies that would be fantastic.

As we heard from the Global Fund, the multilaterals where there is that multi-buying spend, are subject to the programme management processes, standard operating procedures, things such as annual reviews, those very thorough annual assessments of performance against agreed targets in the results framework. They are subject to that scrutiny. I can give you an example. When I was working in Nigeria, the girls’ education programme there was receiving over £100 million and was not performing against these targets. It was built on a performance plan and that was done in partnership with UNICEF there but DFID as it was then had that mechanism in place to scrutinise the spend as they would in a bilateral spend through a contractor. There were those mechanisms in place.

From the other side have you seen when those mechanisms have not been strong enough and they have not worked well?

I think this goes back to the relationship. Where I have seen it being trickier is when it is not clear that the UK has a position to put requirements, additional requirements on that multilateral to comply with the value for money reporting because there are MOUs in place already around the reporting requirements and so that additional reporting burden is pushed back and they say that that is not part of the agreement at the global level so they cannot put this extra reporting level in place. Does that affect the overall outcomes of the programme? It certainly may affect the line of sight from the funding to the results, for example, but as I mentioned before if that relationship has been entered into, that channel has been selected because of an understanding of the comparative advantages of that organisation, then outcomes may be achieved but there may not be a transparent line of sight from the resources through to the results.

Just one question to all three of you if possible and just short answers, please. From your perspective does the FCDO apply enough scrutiny over how money is put into these multilateral organisations?

Yes.

Okay. That is very good. Jennifer?

Yes, I think the UK has very high standards and most multilaterals are in line with those but I think things such as the multilateral aid review, MOPAN, are important.

The same impression. From the peer review of the United Kingdom that was done in 2020, the conclusions were more or less the same, that the UK looks and tries to allocate funding to the multilaterals depending on their performance, basing itself both on MOPAN assessments but also on its multilateral aid reviews and I think that is seen as an efficient way of doing things.

We have an annual review so that is one of the highest standards of all our donors.

I think both those things. It is best practice. It was helpful to us because we were looking for ways to define what value for money was but, yes, they were very insistent and it is as I say part of that annual review. It is baked also into our indicators, so the role that the UK plays on our board and on our committees meant that they had a way to influence and convince the other board members that this was one of the measures we needed to take into our indicating framework and our performance framework, monitoring and so on. Yes, they have embedded it throughout all the processes in the organisation, which is why we can confidently say that we report on it because it is embedded in several levels within the performance framework of the organisation.

No, I think there is still a very high level of scrutiny. We have not noticed—if anything there is more scrutiny.

One thing we do insist on because we think it is the most efficient and effective way to do things is that that must be embedded in a board conversation. They must convince the other board members and it is not only donors. There are the implementing partner countries, civil society and the private sector who all sit on our board. They have to convince everybody that that is the way to go and we insist that we report in a framework that has been agreed by the whole organisation. Ultimately the burden falls on the countries themselves and we cannot add additional reporting lines and so on for the countries to report on so we insist that we agree on that framework together, that is what we will measure, and then we report as needed and as often as needed, but it is within that framework that has been agreed, not bespoke.

The USAID was a very impactful development organisation. The French have within their development funding arm a specifically dedicated health element called L’Initiative, and L’Initiative has a lot of reporting frameworks that again help to embed those at the country level. That is also a key part. Honestly, DFID was and I guess FCDO now is a leader in value for money.

We are very focused on implementing our programme but we are very concerned about the potential impact. We are watching very carefully and working with partners to see what the impacts will be. We are also aware of the waivers, so we are waiting to see exactly how the waivers will play out and whether there will be challenges at the country level. We are particularly concerned because we have made so much progress against the three diseases. As you know, these are infectious diseases so they are formidable adversaries, and if you let up for a minute malaria resurges within months. We have seen that where you neglect the programmes, the HIV outbreaks—there are major outbreaks in several places in the world right now—if you turn away for a short time, the diseases resurge. We are very concerned about that. We do want to continue to make progress.

What you are saying there about DFID almost being inherited into FCDO—I am not sure that we have quite the same confidence as you that those reporting levels are as strong as they used to be. I will just put that on record. You mentioned a word earlier, which was sustainability, which is not really baked into a lot of the value for money concepts but it has been flagged in previous audit work that it is missing. Can you expand on what you meant when you mentioned sustainability and why you felt that is important to flag to us as a Committee?

We do think that is a key way in which you also measure your value for money. Are you investing in ways that are going to be sustainable over the long term? As I just mentioned, infectious disease does not go away entirely. You must be constantly vigilant. Some of the ways in which we are investing now for example in disease surveillance or some of the other investments we have made in oxygen over the last few years are designed to be long-term investments that will maintain. That is a measure that we need to look at in value for money, not just did you get value today but will that deliver value in two years’ time? Also when the Global Fund has reduced and moved out of a country, is that still delivering a sustainable model for the country to follow? We are looking at that as a key element also of how effective and efficient we are.

Quickly, and building on Laura’s question about USAID, I would imagine that the FCDO’s approach to scrutiny over how money is spent in multilateral organisations is similar to how USAID would do it. We have just seen a new Department of Government Efficiency open up in America and it is currently heavily looking into this. What do you think the findings from this new department, DOGE, will find about spending in multilateral organisations on aid?

I do not think I am in a position to comment because I do not know what the framework will be or what they will be looking for.

High level though from the other side, so you have obviously seen it, you have seen the politics play out now and this department is going to be looking into government efficiency and how that money is spent. Is there no understanding of where that might go and where the gaps might be?

No, because we have not seen the framework of how they are going to conduct that review. I can speak confidently for example to the MOPAN review or the annual review that FCDO does because we know what the components are, we know exactly what they are being measured against, we know how we are supposed to report on that and we are ready to do that to whoever asks for a review of what we are doing and how we do it. The first step of doing a review is to identify what you are measuring, how you measure it and what the reporting requirements for that are. We do not know what those are in that context.

Jennifer, this is a question for you. The FCDO has not performed a widescale review of multilateral aid since 2016 so what factors should be considered if a new review were to be commissioned?

The factors to consider would be this question about proportion of spend, so the justification of moving more money to multilaterals rather than bilaterals. They will come at a cost to bilateral programmes so there needs to be a justification and I think by doing a multilateral aid review something that was on it in 2016 was able to identify those multilaterals that were aligned with the UK policy objectives, strong processes and there is an opportunity for the UK to say where there is alignment there and therefore select or not select. That is what happened after the last review, that some funding was pulled from multilateral organisations. It is selecting the best multilaterals for the UK to invest in, given the priorities. I think that is important because it acts as a justification for not spending it on bilateral aid, which can also achieve great outcomes and impact.

Abdou, I see you nodding. Is there anything you want to add to that?

Yes, I agree with what Jennifer said. Maybe one thing I would add is, and I am not familiar enough with the 2016 aid review, I do not know if it was included or not, but since we did not touch on this today, I think it is also important if it looks at value for money to consider some of the benefits that the UK gets through its multilateral development co-operation, for example, in how it helps through the pooling to also mitigate risks, reducing the exposure to any single country for example or taking financial risks if it is for lending, operational risk when it is more on delivering humanitarian aid and also because soft power was mentioned before, in terms of voice and influence. Obviously you have some influence through your wallet and your multilateral allocation to put your money where you think that multilateral organisations are the best performing but also we have seen in the previous OECD review that the UK is good at engaging with multilateral partners, whether it is through secondment or through its role at the governing board where it is able also to have an influence on things such as the reform of the multilateral architecture. So just things to take into account also for another review.

That is brilliant, thank you. Jennifer, coming back to you, what is the impact of rigorous value for money assessments on delivery partners and local organisations on the ground?

I think it depends. You will have seen in the written evidence that some NGOs for example will find this burdensome. Value for money reporting can sometimes be in addition to the already very thorough oversight mechanisms that we have talked about here, annual reviews and so on, and value for money reporting is part of that. Yes, it is important that it is proportionate. That is the main thing, but at the same time we have heard over the last 10 years the agenda has shifted to organisations to be able to answer these questions on what the return is on investment and such organisations were not in that position 14 years ago. It is important to be proportionate. A lot of the bilateral suppliers had a vested interest in investing in their approaches to value for money and setting up systems to report on unit costs and things such as that. Those sorts of resources maybe were not available to all delivery partners and implementing partners, especially those that were locally based or run on much tighter budgets. It is important to be proportionate but it has brought a lot of benefits overall.

I am not sure who wants to take this one. The FCDO has also started to use different types of financial products as well, so use of financial guarantees, for example. I think it is also using more British investment partnerships. What are your views on those other avenues for delivering support for different parts of the world as opposed to direct grants?

I can maybe just say, first, we only receive grant funding for now but one of the other mechanisms that we have found very effective is our debt to health process. We have a debt conversion process where we work with debtor countries and debtee countries to convert debt into health spend that the Global Fund monitors so that has become a very effective way of freeing up some of the debt burden in some of the countries as well as turning it into a health impact so it is a trilateral win-win-win. That is as far as it goes. We are not using any of these other mechanisms for the moment.

Have you seen other countries choosing to do that as opposed to going down the grant route?

Yes. The donor countries that are doing that with us, are using it as a way to augment the grant funding that they are giving us so not replacing but augmenting it.

Enhancing, yes. Jennifer, Abdou, do you have thoughts on that?

Really quickly on my side, financial innovation and the increasing number of financing instruments that are used are also something that we see in the multilateral system obviously with the ongoing reform of the MDBs and other financial institutions. We think it is going in the right direction in the sense that it probably gives a variety of instruments that can serve different purposes. It also allows to increase the mobilisation of private finance and leverage more from the balance sheet. At the same time we have a word of caution because we feel that there is always a trade-off between volume and concessionality and at some point value for money should also mean that you consider whether giving more but to middle income countries is more useful than maybe having a smaller pot of money to allocate but to lower income countries. That is something that we are carefully monitoring also to see what the implications of these newer financial instruments are.

Finally, Jennifer, anything that you would add?

Nothing other than that in reviewing the value for money framework for ODA, this trend should be acknowledged so that ODA can be used in the best way given those changes in the financing landscape.

Witnesses, Committee, thank you very much. That was an excellent start to our inquiry on FCDO and value for money. You have given us an awful lot to think about. We really appreciate that and please if you have any follow-on thoughts or if there are any documents that you could help us with supplying that would be great.