Aide memoire: a reminder of the next steps to fix foreign aid

By Jeremy Hutton, policy analyst at the TaxPayers’ Alliance

Following years of unabated campaigning by the TaxPayers’ Alliance, the UK’s international development budget has been cut, and rightly so. Just as our polling from 2019 showed, taxpayers have supported this, recognising what many politicians do not: that an over-sized aid budget is economically irresponsible in the midst of decimated public finances and a record-breaking recession.

Listening to the pro-aid lobby, you could be forgiven for thinking that this cut relegates the United Kingdom to the status of an international pariah. As if we were reducing aid to no more than a tiny fraction of its former level. In fact, not only is 0.5 per cent of gross national income (GNI) still far above the UK’s average aid levels of the 1990s and 2000s (0.4 and 0.3 per cent respectively) but it is much greater than many of our closest allies and neighbours.

France, for example, spent 0.43 per cent last year and the United States 0.16 per cent. New Zealand and Canada, led by internationalist prime ministers Jacinda Ardern and Justin Trudeau, parted with less than 0.3 per cent. Germany, which at one point came close to matching Britain and spending 0.7 per cent, has since settled at 0.6 per cent. If anything, Britain is becoming more similar to our international allies. 

However, the fight to reform foreign aid is not over.  As welcome as the reduction from 0.7 to 0.5 per cent of GNI is, the legislated target has so many flaws that its existence at any level, higher or lower, should be resisted.

In our 2019 report, First aid: fixing international development, we found several issues with the foreign aid target which are still pertinent.

The most avoidable problem of all, is meeting the target according to the calendar, rather than the financial year. Every year, departmental budgets are set from April to March. However, the aid target has to be met according to the calendar year, thanks to the heavy-handed legislation, which makes it much harder for departments to plan their spending. 

This can leave the UK with piles of money it must rush to spend at the end of the calendar year. Instead of spending taxpayers’ cash on worthy aid programmes, it ends up going to multilateral organisations without specific projects in mind. Initially, the Treasury had expected government departments, except for the Department for International Development (DfiD) - now the Foreign Commonwealth and Development Office (FCDO) - to spend 90 per cent of their aid budget in the calendar year. However, so difficult have other departments found meeting this target, that it has been continuously revised down and is now only 80 per cent. This daft system undoubtedly incubates wasteful attitudes. 

Another issue is that the target is exceptionally rigid, leaving little leeway for handling sudden emergencies. A notable example was the struggle to fund disaster relief for some British overseas territories after Hurricane Irma ripped through the Caribbean in 2017. Because this disaster relief could not be paid for from the Overseas Development Assistance (ODA) budget (as these territories had all graduated from being considered middle-income countries), the government was forced to raid taxpayers’ coffers to pay for the relief. However, if the 0.7 per cent legislation had not prevented it, the government could have simply used the humanitarian aid budget. Whilst this would not have counted as ODA, the money would still have helped people abroad when they needed it most.

Meeting a precise target, then, comes with a myriad of problems; which the FCDO must expend significant amounts of resources on meeting, without exceeding. As the Independent Commission for Aid Impact (ICAI), the aid watchdog, stated in its latest report, 'There is no question that this [managing the 0.7 per cent target] was resource-intensive for DFID, with high opportunity cost.'

ICAI has recommended a number of simple ways to solve these problems. This could be through the implementation of a ‘tolerance range’ of 0.1 per cent above or below the target, or through use of a multi-year rolling average so that if the target is exceeded or is not met, spending could simply be adjusted the following year. 

These are simple, common-sense, measures which should be supported by all, irregardless of whether they want higher, or lower, foreign aid spending. Adding flexibility to an unnecessarily rigid target would be a good first step for taxpayers. 

Cover image credit: DFID / Rich Taylor used under the creative commons license 2.0

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