The UK spends approximately £1.23 billion each year on aid through the European Union. Unlike the UK, European aid and development assistance is split between two different departments: Directorate-General of EuropeAid, Development and Co-operation (DG DEVCO) which formulates policy and disperses development funding whilst Directorate-General of Humanitarian Aid and Civil Protection of the European Commission (DG ECHO) looks after the humanitarian aid brief. In addition the European External Action Service (EEAS) is responsible for development programming and oversees delegations in third countries. We are concerned that this has the potential for a fragmented approach.
The European Development Fund (EDF) (which is outside the official European Commission budget) and ECHO share the same poverty reduction objectives as DFID and are delivered in ways which represent value for money. The UK has in theory discretion over the funding of the EDF.
Official Development Assistance (ODA) spent through the European Commission budget is less well targeted at the poorest countries than that spent through the EDF. Moreover, some funding for other programmes (for example, the European Neighbourhood Partnership Instrument) administered by the Commission to middle income countries such as Turkey is reported as ODA which means that it counts towards the ODA target of 0.7% of Gross National Income. The DFID Minister told us that 'it would take forever and be difficult' to change the definition of ODA so as to exclude relatively wealthy countries and that a change in the definition would make it difficult for some countries to meet the 0.7% target. We do not accept this: the Government should be bolder and less risk averse by tackling the criteria for ODA so that more funding goes to the world's poorest people and the poorest countries, and less to the European neighbourhood. Failure to do this may undermine the UK public's support for EU institutions.
There are a number of advantages of the EU as a conduit for development assistance:
- it acts as a channel for Member States which have not previously provided development assistance;
- some Member States would spend even less on aid were it not for the European Commission, thus there is overall higher spending on aid than would otherwise be the case;
- it is able to operate large-scale regional programmes;
- it operates in sectors where the UK rarely does, for example road building;
- it has a presence in countries where the UK does not have a bilateral programme, enabling the UK to play a part, through its contribution to European Commission funding, for example to development cooperation in Niger and Haiti.
There are, however, a number of disadvantages with EU development assistance. The European Commission's administrative costs are twice those of the UK Department for International Development (DFID), although not higher than other multilaterals. The higher costs are in part because the European Commission is present in more countries than DFID and it does more direct programming which requires more administration; nevertheless, the Commission must put more emphasis on achieving value for money.
European Commission procurement has been described by a prominent development organisation as bureaucratic, time-consuming and cumbersome. This is in part because of the need for careful checks to avoid corruption. Nevertheless, we recommend that DFID press the Commission to reform its procurement procedures. In addition, the Commission should focus more on results and on learning from them and ensure it independently evaluates its programmes.
Overall, the European Commission has improved its performance over the last decade and has recently proposed further improvements to development policy in An Agenda for Change and funding instruments as part of the Multi Annual Financial Framework negotiations. These include increased emphasis on governance conditionality, especially for budget support; a greater focus on results; and increasing the role of the private sector in development. We support a number of these changes, but have concerns that conditionality should not hurt the poor for the sins of their governments.
The European Commission has also proposed to cut bilateral aid to nineteen middle income countries (although these countries will still be eligible for thematic funding under other instruments). We agree with this proposal. The Commission spreads its aid too widely and this leads to inefficiencies, including high administrative costs. DFID should press the European Commission to reduce further the number of countries it has programmes in.
Although we support proposals for ensuring better division of labour amongst donors to increase aid effectiveness and efficiency, we do not support the European Commission proposal for joint programming if it involves the Commission playing a leading role in coordinating the work of Member States with a better track record than its own. We do support joint programming by consensus where the Commission is operating alongside bilateral donors, thereby reducing transaction costs for recipient countries.
The Minister told us that the UK was arguing for no real growth overall in the European Commission budget, but a higher proportion spent on ODA. We strongly support the Government's proposal to increase the percentage of the budget going to ODA given the extent of international need and commitment made by EU countries to increase levels of development assistance and climate funding. We urge the Government to press hard for other EU countries in particular Germany, France and Italy to step up to the obligations they made on the 0.7% target.
We think that incorporating the EDF into the budget in 2014 (i.e. 'EDF budgetisation') is premature and should be postponed until 2020 when the Cotonou Agreement (between the EU and the African, Caribbean and Pacific (ACP) states) ends unless it leads to an overall increase in ODA delivery and an increased share of the budget going to the poorest people and the poorest countries. The EDF is an instrument of the Cotonou Agreement and any decision about it should be made in consultation with the ACP states and in such a way as to preserve the benefits of the relationship.
The Development Cooperation Instrument (DCI) should get a proportionately smaller increase than the EDF unless there is a significant improvement in its efficiency and effectiveness.
DFID should become a champion for policy coherence for development, reducing the harm done by some aspects of EU trade and agriculture policies and by working to ensure climate change policies help development opportunities for the poorest. DFID should encourage the Development Commissioner, Andris Piebalgs, to promote development issues other than aid and work closely with other Commissioners on a range of issues including climate change, agriculture, trade and foreign and security policy. DFID should put the case in Government for the development implications of the Common Agricultural Policy, trade tariffs, and climate change.