Meeting our side of the bargain
8. The UK Government prides itself on being a leading
player in international development. If this claim is to be justified,
then the UK must meet its commitments, particularly on MDG8 and
on providing more resources for development. Since Monterrey,
the Government, with the Chancellor of the Exchequer, The Rt Hon.
Gordon Brown, MP leading the way, has been very active in exploring
ways of delivering the increased resources which are needed if
the MDGs are to be met. The laudable aim has been to ensure that
no country which is genuinely committed to good governance, economic
development and poverty reduction should be denied the chance
to achieve the MDGs because of a lack of resources.
9. In recent years, the UK has been increasing rapidly
the volume of aid it gives, and, recognising the need to deliver
an immediate step-change in resources, has proposed the establishment
of an International Finance Facility (IFF).[8]
Such a facility would front-load donors' aid, and use this aid
to lever more resources from the international financial markets.
Whilst we recognise that this proposal is not cost-free—the
money levered from the markets would need repaying out of future
aid flows—we strongly support the proposal for an IFF. More
than 35 countries—mainly developing and emerging market
countries—have endorsed the proposal, urging donors to implement
it. Additional broad support has been given to the proposal by
NGOs, the International Financial Institutions, faith leaders,
and such international figures as Nelson Mandela and Kofi Annan.[9]
10. Debates about the merits of the IFF have become
intertwined with debates about the UK's progress towards meeting
its shared 36-year old commitment to provide 0.7 per cent of national
income as aid. To some European countries, the UK's advocacy for
an IFF has been a distraction from the fact that the UK is nowhere
near meeting its commitment to 0.7 per cent.[10]
The Government has been at pains to stress that it was never a
question of either 0.7 per cent or the IFF, but there is no doubt
that UK reluctance to set a timetable to meet the target, and
UK aid levels which fall far short of 0.7 per cent, have made
the UK's position on aid subject to criticism. Put simply, the
UK has been accused of talking a good game, but failing to stump
up the necessary resources.
11. In July 2004 all this changed. In announcing
the results of the Spending Review, Gordon Brown, MP—responding
in part to a well-organised and concerted campaign by NGOs, faith-based
organisations, trade unions and others—announced massive
increases in UK aid. By 2007-08, UK aid will amount to nearly
£6.5 billion per year, or 0.47 per cent of Gross National
Income. This is a real terms increase of 140 per cent since 1997
and, for the three years covered by the latest Spending Review,
will be delivered by average annual real-terms increases of 9.2
per cent. In particular, more resources will be provided to tackle
poverty in Africa, and to fight HIV/AIDS. At the rate of progress
to be reached by 2007-08, the UK would meet its 0.7 per cent target
by 2013. The announcement of massive increases in aid, and a date
by which the target of 0.7 per cent will be met, shows that the
Government is serious about playing its part in building a global
partnership to tackle poverty and to meet the MDGs. By announcing
a substantial increase in UK aid, and outlining a timetable to
reach 0.7 per cent, the UK is in a stronger position to persuade
its European neighbours, and others, to support the IFF. As the
Chancellor noted in his Spending Review announcement, if the International
Finance Facility were established, the UK could reach the 0.7
per cent target by 2007-08.
12. But increases in aid and the IFF are part of
a wider picture; the resources which developing countries need
if they are to have any chance of meeting the MDGs. Debt relief
too is part of this picture. Prior to the G8 Summit at Sea Island
in the USA in June 2004, stories in the press suggested that significant
improvements to the HIPC [Heavily Indebted Poor Countries] debt
relief initiative might be imminent. Regrettably, such progress
did not materialise.[11]
At Sea Island, the leaders of the G8 reaffirmed their support
for the HIPC process, agreed to provide some additional resources
for topping-up the initiative, and extended the initiative by
2 years. More progressively, G8 leaders agreed to explore ways
of dealing with unsustainable debt, a situation which many countries—including
many of those which have gone through the HIPC debt relief process—face.
One possible approach is to provide more grant-financing for developing
countries, but as DFID's Masood Ahmed explained to us this would
leave countries vulnerable to economic shocks for perhaps 12 or
15 years. We were interested therefore to hear that DFID—along,
we assume, with the Treasury—is examining ways in which
countries' unsustainable debts might be dealt with more quickly,
and developing countries' economies made more robust and resilient
to shocks.[12]
13. Together with many developing countries and NGOs,
we have long taken the view that the starting point for thinking
about debt relief, and debt-sustainability analysis, must be the
MDG-financing needs of developing countries. We welcome the
fact that the Government is trying to shift the discussion away
from debt per se, and towards consideration of countries'
MDG-financing needs, including, but not limited to, the resource
needs of heavily-indebted countries. When the leaders of the G8
meet in Scotland in June 2005, they will be expected to deliver
on debt relief; the UK Government must do all it can to ensure
that these expectations are not disappointed. In September, the
Chancellor of the Exchequer announced that the UK would—out
of the aid increases announced in July—finance multilateral
debt relief amounting to £100 million. We warmly welcome
this move and hope that other G8 nations will play their part
in ensuring that debt relief will at long last offer countries
a truly sustainable exit from the burden of debt. We in the developed
world must do all we can to ensure that developing countries do
not face the impossible choice of either servicing their debts,
or improving their provision of basic health and education.
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