EC Development Funding
21. The Department have provided details of DFID's
resource allocation by objective (Table 2), a significant development
from the previous year. However, EC Development Programmes funding,
estimated at £865 million or 23% of the resource budget in
2003-04, appears as a separate line with no objective or targets
indicated. For such a significant sum it is important for the
Department and taxpayers to be clear whether and how this money
delivers the government's development objectives. With more volatile
exchange rates the £Sterling equivalent of the €Euro
amount attributed to the UK can vary significantly year-on-year.
Because the total DFID budget is set inclusive of the EU element,
this means that adverse exchange rate movements have to be funded
out of the remainder of the Department's budget. This is essentially
"top-slicing" and reduces the resources the Department
can direct to priority areas. We would welcome DFID's view on
how it protects its priority budgets against the risk of currency
fluctuations.
22. The Department told us that whilst poverty reduction
is now at the centre of EC policy, "question marks remain
as to how widely the policy has been applied" and that only
44% of EC funding had gone to low income countries in 2001.[38]
The EU's record in terms of the share of aid reserved for poor
countries remains substantially worse than that of individual
member states. DFID also told us that they are "working to
produce a framework to measure the effectiveness of multilaterals"
and that a key objective is to increase the poverty focus of this
EC development expenditure.[39]
The enlargement of the EU may pose a new challenge for achieving
DFID's objective. The accession countries have small aid programmes
and also have understandable interests in their own immediate
regions.[40] DFID will
need to find ways of ensuring that the accession of the "ten"
does not reinforce the tendency for the EU to focus on the "near
abroad".
23. The relative weight
of the EU in member states' aid programmes has changed significantly
in the last decade. The Overseas Development Institute (ODI),
in analysing DAC data to show the share of member states' aid
channelled through the EU in 1992 and 2001, has identified an
increase in the number of countries which provide more than 20%
of their aid through the EU.[41]
Whatever the reasons behind this shift it provides for the possibility
of more countries showing greater interest in the quality of the
aid provided thought the EU. As the ODI pointed out, the constituency
for reform may be larger and more determined than has been the
case to date. The European Commission produces an annual report
on EC development policy and the implementation of external assistance.
We reviewed the 2001 report. This was a year of reform for EC
external assistance and the annual report was detailed and comprehensive.
This annual report does not, however, provide a succinct assessment
of how the EU external assistance meets the UK's development objectives.
That is what is required in DFID's annual report. In order
for DFID to meet its own objectives we consider it essential that
the issue of reforming EC development issues and developing systems
to monitor the effectiveness of this multilateral aid continues
to be given a high priority within the Department. In addition,
we would like to see more information in the departmental report
about how these funds are used, the framework for distributing
EC development funds, current shortcomings and limitations in
this, including in measuring aid outcomes and DFID's own efforts
in this area.
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