House of Commons - Draft International Development (Official Development Assistance Target) Bill

Draft International Development (Official Development Assistance Target) Bill - International Development Committee Contents

2 Implications for other countries

Galvanising other donors

7. As noted in the previous chapter, the main purpose of the proposed Bill is to place a legal duty on the Secretary of State for International Development to ensure that the target of allocating 0.7% of GNI to Official Development Assistance is met by the Government in 2013 and in each subsequent year. This target was first set by the UN General Assembly in 1970. Resolution 2626 called on the economically advanced countries gradually to increase their development expenditure and use their best efforts to reach 0.7% of their gross national product (GNP) by the middle of the decade.[6] This is generally accepted as a legitimate target for donor countries, and has been reaffirmed in a number of international conferences and agreements since then. However to date only five donor countries—Denmark, Luxembourg, the Netherlands, Norway and Sweden—have consistently met it.[7]

8. The Government believes that this legislation would demonstrate the UK's commitment to reaching the UN target, despite difficult economic circumstances, and galvanise other donors to renew their commitment to the target. It argues that its own commitment to meet the target, announced in 2004 ahead of the 2005 Gleneagles summit, triggered increases in aid levels and helped secure the EU commitment to average expenditure of 0.7% GNI as ODA by 2015.[8] At present OECD DAC donors provide an average of only 0.33% of GNI as ODA.[9]

9. Our 2009 report on Aid Under Pressure noted that Italy had reduced its development assistance by 56% in 2002 and that Ireland had made cuts totalling €255 million to its development assistance budget in 2008 and 2009.[10] Recent figures from the OECD note a shortfall in aid from several large donors. The 15 countries which are members of both the EU and the OECD Development Assistance Committee committed to reach a minimum ODA country target of 0.51% of GNI in 2010. Of these, nine will meet it, while six will not. Those falling short are Austria, France, Germany, Greece, Italy and Portugal. The OECD notes that, as a result of under-performance by donors, Africa will receive only US$12 billion of the US$25 billion increase in aid promised in 2005 at the Gleneagles summit.[11]

10. We discussed the potential of the Bill to galvanise other donors to meet their aid commitments with witnesses. The OECD said that enshrining the 0.7% commitment in law would "send a powerful message to EU members who are struggling to meet their obligation, and would add to the UK's credibility as a global leader on development."[12] Oxfam noted that:

Other donors have voiced their concerns around the potential impact of the financial crisis on aid budgets. UK legislation on 0.7% would send a powerful signal to other donors that there continues to be serious public support reinforced by political will for meeting the 0.7% commitment.[13]

Karen Jorgensen, from the OECD, told us that the UK was already a leader on a number of dimensions of development and that by promoting and sticking to its commitments it had gained a certain amount of leverage "to keep pushing other donors to follow suit and honour their commitments." She also said it would help the DAC peer review process by allowing the UK to be held up as an example for other donors. She highlighted that the OECD had been extremely critical of Italy's performance in a recent peer review although it was not clear what effect this would have on Italian domestic political decisions.[14] Simon Maxwell also thought that the UK's commitment could be used as a "campaigning tool" to encourage other countries to "join-in".[15]

11. No other OECD donor has enacted legislation to meet the target, although Belgium has legislation which requires a "solidarity note" to be presented in parliament, alongside the annual budget, setting out how the target will be met.[16] On the other hand, the five other donors who have already met the target have done so without accompanying legislation. Karen Jorgensen commented that even in these countries the target was now under pressure.[17] The Minister believed that the forthcoming UN review of the Millennium Development Goals provided an important moment for the UK to demonstrate its commitment to the goal and to help to galvanise other donors who are currently off-track on their commitments.[18]

12. We agree that the forthcoming UN summit on progress towards the Millennium Development Goals in September 2010 is an important moment to renew commitments to aid allocations. Some donors have already fallen short of their interim commitments. We understand that countries often fail to meet their aid commitments because of political and economic circumstances unrelated to the acknowledged need for aid. The UK is already seen as a leader in international development both in terms of funding and delivery of programmes. While UK legislation on the target could provide a demonstration of support for the target ahead of the UN summit, we are not convinced that such legislation will necessarily galvanise other donors, especially those suffering the worst effects of the recession, to meet their aid commitments.

Increased predictability for developing countries

13. The Government says that the proposed legislation will provide greater predictability for developing countries on UK aid levels at a time of economic difficulty.[19] Making aid more predictable is considered to be important for aid effectiveness since it allows developing countries to plan for the longer term.[20] As Simon Maxwell pointed out, "it is incredibly difficult to manage the ministry of finance of a country when people are making aid promises which are then not fulfilled."[21]

14. The 2005 Paris Declaration commits signatories to achieve better outcomes from aid. It said that aid should be based on a number of principles including ownership of aid programmes by developing countries, alignment of aid with developing country priorities, harmonisation among donors, managing for results and mutual accountability.[22] The 2008 Accra Agenda for Action restated these principles and explicitly committed donors to increasing the medium-term predictability of aid.[23]The UK already provides a three-yearly projection of its development assistance spending in the Comprehensive Spending Review, and Country Business Plans usually give a three year funding commitment. The UK has also signed a number of longer term agreements with developing countries for assistance in specific areas, such as the recent seven-year agreement with the UNDP for urban development projects in Bangladesh.[24]

15. We asked witnesses whether they thought the proposed legislation would achieve the desired aim of increased predictability. Many believed that it would and considered this to be important in a period of financial and economic volatility.[25] However Alison Evans, Director of ODI, noted that while aid would be more predictable at the macro level, the amount of Country Programmable Aid (CPA) was a better indicator of aid levels for individual developing countries:

CPA is the amount of aid that is directly programmable by the donor, so it excludes the most unpredictable elements of aid including humanitarian spend, debt relief, cross-border flows and anything not part of cooperative agreements between governments. Currently the share of UK country programmable aid is 65% of total UK ODA.[26]

She also pointed out that the range of CPA was quite wide even between countries which had already achieved the 0.7% target. In Denmark it was 70% and in the Netherlands 40%. This suggested that "there is no simple correlation between 0.7% and the share that is directly programmable by the donor and therefore directly under the influence of the partner countries themselves."[27]

16. The Minister told us he was not proposing to legislate for the amount of aid which should be allocated to country programmes or multilateral programmes, as this should be a judgement for Ministers. There were a number of reasons why a particular country might not receive its expected level of aid, but overall the legislation would give greater predictability to developing countries and would help the Government to move towards more longer term development partnerships.[28]

17. Other factors affect aid predictability. In our Report on DFID's Performance in 2008-09 and the 2009 White Paper we noted the impact of currency fluctuations on aid levels.[29] DFID does not make adjustments to aid allocations in response to exchange rate movements or purchasing power. This has meant that some developing countries received less local currency equivalent assistance than expected in 2008-09.[30]

18. We have also noted that, because the target is a percentage of GNI, the actual amount of ODA fluctuates with changes in the UK economy. It was estimated that the EU pledge to achieve 0.56% of GNI as ODA by 2010 was worth US$4.6 billion less in 2009 than in 2008 because of the economic downturn.[31] To its credit the Government pledged to maintain absolute aid levels in 2009 even though reduced growth predictions meant that the percentage target could have been met by spending £700 million less.[32] The OECD points out that US$4 billion of the overall US $21 billion shortfall in aid this year was the result of lower than expected GNI resulting from the economic crisis.[33]

19. The extent to which commitment to an overall target could provide greater certainty to individual countries is not clear cut given the range of variables. Legislation may help developing countries to know approximately what the UK's aid budget would be over a period of years, but this will not eliminate yearly fluctuations resulting from changes in GNI since the target is a percentage rather than an actual amount. Nor can the impact of changes in currency values be easily avoided. The most important indicator of development assistance available to developing countries remains the amount of Country Programmable Aid, which the proposed legislation does not address. Nevertheless we agree that the Bill would provide a degree of predictability at the macro level—that the total UK aid envelope would not significantly change—and this would send a positive message to developing countries about the UK's overall commitment to international development.

6 A new system of national accounts in 1993 discontinued the term Gross National Product and replaced it with Gross National Income which is considered to be an equivalent concept. See, OECD, Paper on Official Development Assistance: History of the 0.7% target, www.oecd.org Back

7 OECD Press Release, "Donors mixed aid performance for 2010 sparks concern", 17 February 2010 Back

8 Draft International Development (Official Development Assistance Target) Bill, Introduction and background, p 2 Back

9 OECD, "Donors mixed aid performance for 2010 sparks concern", 17 February 2010 Back

10 Fourth Report of Session 2008-09, Aid Under Pressure: Support for Development Assistance in a Global Economic Downturn, HC 179-1, paras 83-86. Ireland will nevertheless provide 0.52% of GNI as ODA in 2010 exceeding the agreed OECD target of 0.51%. Back

11 OECD, "Donors' mixed aid performance for 2010 sparks concern", 17 February 2010 Back

12 Ev 41 Back

13 Ev 43 Back

14 Qs 35-36 Back

15 Q 4 Back

16 Q 38 Back

17 Q 40 Back