3 Ensuring a poverty reduction focus
for ODA
Defining ODA
20. The OECD Development Assistance Committee
(DAC) is the body responsible for defining what types of expenditure
are reportable as Official Development Assistance. The basic definition
of ODA, which has not changed significantly since 1972, refers
to financial flows:
"to countries on the DAC list of ODA recipients
and to multilateral development institutions which are provided
by official agencies or by their executive agencies, and each
transaction of which is administered with the promotion of the
economic development and welfare of developing countries as its
main objective; and is concessional in character and conveys a
grant element of at least 25 per cent."[34]
21. The OECD recognises that there may be some
subjective interpretations of this definition and has thus identified
a number of limits on ODA reporting. For example:
- Military aid may not be reported
as ODA although expenditure incurred on the cost of using donor
military forces to deliver humanitarian aid or perform development
services may be reported.
- Civil police training is reportable as ODA but
using donor police services to control civil disobedience is not.
- Assistance to refugees in developing countries
is reportable as ODA as is temporary assistance to refugees from
developing countries arriving in donor countries and the costs
associated with any eventual repatriation.[35]
Karen Jorgensen told us there were no plans to revise
the current definition of ODA but there were ongoing discussions
about what types of security and climate change expenditures met
the basic ODA definition. However she said there was no great
appetite to loosen the existing parameters. [36]
Ensuring ODA achieves poverty
reduction
22. All ODA provided by DFID is subject to the
2002 International Development Act which stipulates that the Secretary
of State may provide development assistance if he is satisfied
that such assistance will contribute to poverty reduction.[37]
This is a narrower interpretation of ODA than that used by the
OECD. For example we were told that DFID, unlike some other OECD
countries, does not report the first year costs associated with
refugees from developing countries as ODA, even though this is
permissible.[38]
DFID has said it will provide
climate change funding to developing countries from its ODA budget
but has limited this to 10% of ODA.[39]
23. It is important to note, however, that the
2002 International Development Act applies only to ODA provided
by DFID which is currently responsible for only 88% of the total.[40]
Other government departments, for example the Foreign Office,
also provide ODA but this does not fall under the provisions of
the 2002 Act.[41] This
means that it need not have poverty reduction as its primary objective,
although it must still fall within permissible expenditures as
defined by the OECD DAC.
24. Save the Children cautioned that making the
0.7% target a legal requirement might create pressure for items
which do not make a clear contribution to poverty reduction to
be counted as ODA.[42]
Lawrence Haddad questioned whether DFID had the capacity to administer
more aid sensibly if 0.7% had to be secured by 2013. He said "if
it took 11 years to increase the ODA/GNI % by 0.17 percentage
points, an increase of 0.27 percentage points over five years
represents a three-fold increase in ramp up. Can this be done
in increasingly fragile contexts with a smaller and smaller staff?"[43]
We have commented on the extent to which DFID uses its rising
budget effectively and efficiently, and on its staffing levels,
on a number of occasions, most recently in our report on DFID's
2009 White Paper.[44]
25. Save the Children suggested that more explicit
reporting would provide greater transparency about UK aid flows:
The Secretary of State for International Development
should report on the proportion of the overall expenditure that
is cash spending on DFID programmes in Low Income Countries. This
is an important indicator of actual resource transfer to poor
countries, and of whether UK ODA is in fact poverty-focused. The
Secretary of State should also be required to set out clearly
the proportion of ODA accounted for by (i) spending through other
government departments, with these departmental spends itemised
(ii) through multilaterals, (iii) attribution of EU budget spending
on aid (iv) on debt relief and (v) through the Commonwealth Development
Corporation.[45]
Others have also argued that the Departmental Annual
Report should include a breakdown of how much ODA is provided
by each Department.[46]
26. The draft Bill does not
propose any changes to the 2002 International Development Act
requirement that DFID funding is spent on poverty reduction. Nevertheless
we think that there is a very real danger that, as aid levels
increase over the next few years to meet the already agreed 0.7%
target, more ODA will be spent through other government departments
which are not subject to the 2002 Act. Such expenditure may not
therefore have poverty reduction as its primary objective. We
are concerned that this would have an impact on the very high
reputation of the UK as a donor. To promote greater transparency
on ODA expenditure we recommend that the Government make provision
in any new Bill for the detailed reporting to Parliament of ODA
expenditure by other government departments as part of the DFID
Annual Report. We further recommend that the Government explore
the possibility of making all ODA subject to the 2002 International
Development Act.
34 OECD, Is it ODA? Fact sheet, November 2008 Back
35
OECD, Is it ODA? Fact sheet, November 2008 Back
36
Q 28 Back
37
International Development Act 2002, Section 1 (1) Back
38
Fourth Report of Session 2008-09, Aid Under Pressure: Support
for Development Assistance in a Global Economic Downturn,
HC 179-I, paras 102-104 Back
39
Q 91; DFID, Eliminating World Poverty: Building our Common
Future, Cm 7656, July 2009 Back
40
Q 97 Back
41
Q 93 Back
42
Ev 46 Back
43
Ev 39 Back
44
Fourth Report of Session 2009-10, DFID's Performance in 2008-09
and the 2009 White Paper, HC 48-I paras 32-35 Back
45
Ev 46 Back
46
Ev 31, 42 Back
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