Make Bribery and Corruption History

This year we British taxpayers will shell out £4.7bn on the government's international aid programme; that's nearly £200 for every British household.

Setting aside the highly contentious issue of whether taxpayers should be forced to contribute to overseas charity in the first place, do we get value for money?

As we blogged previously, the aid industry has long been a murky corner of government spending, where the action takes place well away from critical eyes here at home, and where it is often impossible to measure success. From the notorious groundnuts scheme onwards, past government initiatives in third world countries have wasted huge amounts of taxpayers' money without much benefiting recipient countries.

Are things any better today?

Ah, no.

The vast bulk of current UK aid is channelled through the Department for International Development (DfID), an organisation that has become synonymous with inefficiency and wishful thinking. For example, as regular BOM readers will recall, they currently spend an extraordinary £0.5bn pa (12% of their budget) on our old friends the consultants. Overall, according to ActionAid, around one third goes on "phantom aid", which does not benefit the world's poor at all.

Shocking enough. But another insight into DfID comes from people who work in the international contracting industry. They tell of what happened when Clare Short decided to switch from tied aid (ie aid tied to the third world recipient buying from a UK supplier) to untied aid.

The idea was that with untied aid, instead of being forced to buy rotten old British products and services, recipient governments would be able to shop around for the best and most suitable deal available from any supplier, anywhere in the world. And we generous British taxpayers would simply write the cheque. That would have to be better, right?

Er, wrong.

What's happened in the real world is that recipient governments- or more precisely, recipient politicians and officials- now have an even freer hand to extract bribes from the world's suppliers. We British taxpayers supply the money unencumbered, free on board, so they can simply phone around to the South Koreans and the Chinese touting for the biggest bribe. Whoever pays it gets the biz.

Brilliant. Short's half-baked plan has actually produced an explosion in bribery and corruption. And sadly, in places like Bangladesh and Nigeria, it hardly needed encouragement.

Now, yes, British contractors obviously have an axe. And you'd have to guess these companies can only operate in some markets on the basis of escalating douceurs (cf the allegations in the BAE case).

But you can be sure they haven't made the whole thing up.
So how much of our aid spending is going on bribery and corruption?

The number has to be BIG. The World Bank has just estimated bribery is costing $1 trillion globally; that's a staggering 1.5% of world GDP. Elsewhere, it's been reported that the "special loading" on the price of those Saudi Tornados may have been 32%.

Our ballpark estimate is that we British taxpayers are currently spending at least £1bn pa topping up the Swiss bank accounts of corrupt third world leaders.
Remember that next time Mr Brown boasts about how much of our money he's giving to his good causes.


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