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This year, as in previous years, we held a short inquiry into the Department for Inter-national Development's (DFID) Departmental Report. It gave us the opportunity to assess major developments in the Department's work and to explore particular areas in depth.
The primary theme for this report is the increasing volume of aid, both nationally and internationally. DFID budgets have risen significantly in real terms in each of the last three Spending Reviews. The 2004 Spending Review alone agreed a 9.2% average annual increase in real terms over the next three years. This means that the budget will increase by 22% by 2008. DFID's budget is set to double over the next 7 years if the UK Government meets its commitment to provide Official Development Assistance (ODA) equivalent to 0.7% of Gross National Income by 2013.
Increases in aid will have a number of repercussions for DFID, particularly as the expanding budget coincides with requirements under the 2005-2008 Efficiency Programme to reduce DFID staff numbers by 10%. This report looks at DFID's options for doing 'more with less' whilst maintaining the quality of its aid, including specialisation, out-sourcing, channelling funds through multilateral institutions and the use of Poverty Reduction Budget Support.
The report also looks at constraints on DFID's ability to increase aid, including developing countries' capacity to absorb increased funds and the need for DFID to meet Public Service Agreement (PSA) targets. The report concludes with a brief exploration of current key issues facing DFID, including trade and Economic Partnership Agreements and China's increasing engagement in sub-Saharan Africa. Our recommendations include:
- the breakdown of ODA figures within Departmental Reports so that readers can easily identify which components of ODA are changing;
- making information available in the Comprehensive Spending Review 2007 on exactly how DFID intends to specialise further, how it plans to divert activities from non-core to core activities and what cost savings can be generated through off-shoring and outsourcing of activities;
- making information available on exactly how DFID intends to balance good performers and fragile states while at the same time increasing its specialisation and focusing on what it deems to be "core" activities;
- clarification of how DFID allocates funding across multilateral institutions, and how DFID assesses institutions using the Multilateral Effectiveness Framework;
- examination of the long-term viability of budget support before it is introduced and the inclusion of governance where appropriate in budget support criteria;
- the inclusion of specific examples in future Departmental Reports of how DFID seeks to achieve PSA targets, and of corrective or remedial action in instances where PSA targets are not going to be met.
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