Written evidence submitted by CAFOD

 

CAFOD used available statistics on the UK economy together with forecasts to estimate the impact of the economic downturn on the volume of UK aid. When combined with the impact of the devaluation of sterling against the US dollar, this gives a cumulative total over seven years (2008-2014 inclusive) of a shortfall of $41 billion wiped from UK overseas development assistance.

 

How have we arrived at this figure? We have compared two scenarios. The first is the 'no-recession scenario' in which there was continued growth of the UK economy at the average rate of 1992-2007 of 2.8% and the pound maintained its value of £1.00=US$2.00 achieved in 2007-08. This is compared with the 'recession scenario' which shows the UK economy shrinking by 1.7% in 2008 with a further fall of 2.9% in 2009 (this is the NIESR forecast, quite similar to the later IMF forecast of 2.8%), followed by a slow recovery of 0.2% in 2010, and quite healthy growth thereafter of 2.4% in 2011 and 2.5% in 2012, 2013 and 2014. In both scenarios we make the optimistic assumption that the UK will progress towards achieving the UN target of 0.7% of GDP in even stages of 0.05% from 2007 to 2014.

 

Clearly the forecasts of what will happen in later years, after 2010, both with regard to the growth of the economy and the value of the pound against the dollar can only be informed guesses.

 

These are forecasts for only one country - a country, moreover, in which for the time being at least all parties are sticking by the commitment to increase aid in line with the pledges made in 2005. This is not the case with other donor countries, some of which have announced cuts in their aid budgets. The combined impact of recession, with aid pledges calculated against a shrinking GNI or GDP, together with likely failure to fulfil even these pledges, will take tens of millions of dollars out of development assistance at a time when developing countries need it most.

 

Please find attached the following press releases which set out in detail the impact of the recession on UK overseas development assistance:

 

UK economy grows for 60 consecutive quarters (Halifax 16/07/2007): http://www.hbosplc.com/economy/includes/16_07_07UKEconomyGrows.doc

 

Double whammy hits UK aid budget (CAFOD 03/02/2009):

http://www.cafod.org.uk/news/double-whammy-2009-02-03

 

And accompanying evidence:

http://www.owen.org/wp-content/uploads/cafod-calculations-recession-shrinks-uk-aid-budget.pdf