EU Development Assistance - International Development Committee Contents

5  Funding: Multi Annual Financing Framework

80.  The European Commission's proposals for the External Actions budget (Heading 4: Global Europe) of the Multi Annual Financial Framework (MFF)—the EU budget—will be negotiated over the course of this year and possibly into next year. The Minister, Stephen O'Brien MP stated that:

The UK sees the EU external spending (Heading 4) as a relative priority and will be arguing for a strong development outcome in the negotiations with a focus on protection of increasing the proportion of Official Development Assistance within a reduced overall post-2013 EU budget.[83]

European Development Fund budgetisation

81.  As part of the MFF negotiations comes the long-standing debate on incorporating the EDF into the European Commission budget (EDF budgetisation). While the European Commission and the European Parliament have been proponents of budgetisation in the past, the EU Member States' views diverge. The UK has traditionally opposed budgetisation for the following reasons:

  • Member States have more influence over EDF decision-making than European Commission budget-financed development cooperation.
  • The poverty focus of the EDF would be put at risk by integrating it into the European Commission budget where funds have the potential to be diverted to different priorities.
  • The EDF provides more predictable funding as it is established for a six year period as opposed to the European Commission budget which is approved on an annual basis by the Budgetary Authority (the Council and the European Parliament).

However, the main argument against budgetisation is the extra cost to some Members States as their shares became based on a percentage of GNI rather than on voluntary contributions. This would particularly affect new Member States whose contribution would increase substantially. The UK contribution will decrease slightly—by around 3%.

82.  In this round of the MFF, the European Commission has proposed to maintain the EDF outside the European Commission budget. The reasons given for this are:

  • this is the last EDF under the Cotonou Agreement which expires in 2020. In the eight years until the Cotonou Agreement ends, the ACP and the European Commission can work on possible options for the future and plan for more radical changes; and
  • it is unlikely that a consensus between the Member States in favour of 'budgetising' the EDF would be found.

Commissioner Piebalgs told us:

I know that politically it is more attractive to look to the north of Africa and to the neighbourhood. I know it, but I care that the people in the Solomon Islands, Nepal or Burkina Faso get the money, and the EDF has clout as a poor country or poor people instrument. In these times of austerity, I did not want us, in the budget debate, to put away this issue as a secondary one[84]

An overall amount of €30.3 billion (in 2011 prices) has been proposed for the next seven-year budget, a 13% increase on the €26.9 billion (in 2011 prices) for the current six-year budget (2008-13). The overall amount will need to be agreed by all the Member States.

83.  Like the Commission the UK Government has also changed its position on EDF budgetisation: it is now arguing for it to be budgetised but only under the following conditions:

—  EDF criteria on purpose and allocation is maintained;

—  aid to ACP countries (and Overseas Countries and Territories) is ring-fenced although it should be frozen at 2013 levels in line with the UK position of no real growth in any area of European Commission expenditure;

—  long term financing on a seven year basis is ensured with regular reviews to allow for adjustments;

—  the fundamental principles of the EU-ACP partnership are protected with the focus on poverty reduction; and

—  the decision-making process is protected with the EDF Committee - in which the 27 Member States are represented - continuing to have the ultimate decision making power.[85]

84.  We do not support the European Development Fund (EDF) becoming part of the main European Commission budget in 2014, six years before the expiry of the Cotonou Agreement. EDF budgetisation should only be considered if: there is a shift in European Commission budget funding away from middle income countries to the poorest people and the poorest countries; it can be used as a way to get other Member States to contribute more; and there is thorough consultation with the ACP. The future of the EDF should be discussed in parallel to the future of EU-ACP relations.

Development Cooperation Instrument

85.  The European Commission has proposed a 19% increase in the Development Cooperation Instrument (DCI)[86] in real terms, from €17.2 billion to €20.6 billion in 2011 prices, compared to a 13% increase in the EDF, from €26.9 billion to €30.3 billion. Commissioner Piebalgs explained to us that the increase in the DCI was due to two new elements: the fight against climate change; and the the EU-Africa partnership—supporting action plans agreed at the EU/African Union summit.[87]

86.  The Commissioner's assessment is reflected in the reorganisation of the five previous thematic programmes of the DCI (Non-State Actors, Food Security, Investing in People, Environment, Asylum and Migration) into: Global Public Goods and Challenges (where 25% of funding must go to climate change); Civil Society Organisations and Local Authorities; and the Pan-African programme.

87.  In addition to the regrouping of the thematic programmes there are further changes to the DCI. One proposal is to simplify the programming process—country strategy papers will be superseded by national development plans which the European Parliament will no longer have a formal programming role with. Instead the European Commission proposes consulting an advisory committee of Member States. Another proposal is to make the instrument more flexible to respond to evolving situations by cutting out the legislative process for changing geographic and thematic programmes and reducing it to a delegated act which will just require consent from the Member States and the European Parliament.[88] The final proposal is that of differentiated development partnerships as discussed in the previous chapter under An Agenda for Change.

88.  In light of the results of DFID's Multilateral Aid Review we are not convinced that the Development Cooperation Instrument (DCI) should get a larger percentage increase in its funding than the European Development Fund. We recommend the UK Government negotiates for a smaller increase to the DCI unless efficiency and effectiveness is significantly improved.

The 0.7% target

89.  In 2005 the EU and its Member States agreed to achieve a collective target for Official Development Assistance of 0.7% of GNI by 2015 and an interim target of 0.56% by 2010. The EU missed its 2010 target, providing €53.8 billion of development assistance (0.43%) missing the target by €15 billion.

90.  A recent academic paper argues that, if EU Member States are to meet the pledges they have made for 2015 then aid will need to roughly double. The paper maintains that if the Commission is to keep its 'market share' of this target, its aid would also need to double its spending and continue to increase it throughout the period of the MFF.[89]

91.  However this comes at a time of recession in some EU Member States and with governments under pressure domestically to reduce overseas spending. Some Member States have taken the position that the European Commission budget as a whole including the EDF should be reduced by €100 billion.[90] Commissioner Piebalgs described the situation to the Committee as "an uphill struggle" but one with which he "will not admit failure because what gives [him]courage is the UK [achievement]".[91]

92.  We asked the Minister what the UK was doing to encourage other Member States to keep their promise to meet the 0.7% target. The Minister replied that the most effective means was leading by example.[92] While the UK met its target for 2010 of 0.56% and is on track to meeting its 0.7% target by 2013, other member states need to improve. Although in 2011 a majority of members of the German Bundestag expressed their support for the 0.7% target,[93] Germany is still some way off meeting this target (currently 0.4% of GNI); as is France, whose aid dropped (-5.6%) to 0.46% of GNI. In other countries declines in ODA spending have been even greater.

93.  We agree with the Minister that the UK should continue to lead by example in making progress towards the 0.7% target. It is only by meeting the target ourselves can we continue to put pressure on other EU Member States to do the same, particularly Germany, France and Italy.

83   Ev 77 Back

84   Q 112 Back

85   Information from informal meetings in Brussels with DFID /EU officials  Back

86   Development Cooperation Instrument (DCI) concentrates on Asia, Latin America, the Middle East and South Africa as well as containing a set of crosscutting thematic programmes which are applicable to all developing countries. Back

87   Q113 Back

88   Gavas, Mikaela 'The European Commission's legislative proposals for financing EU Development Cooperation', ODI, February 2012 Back

89   European Think-Tanks Group, The EU's Multi Annual Framework post 2013: Options for EU development cooperation, June 2011 Back

90   Kilnes, Keijzer and Seters and Sheriff, More or less? A financial analysis of the proposed 11th European Development Fund, ECDPM March 2012 briefing note Back

91   Qq 88, 114 Back

92   Q 183 Back

93   Keeping our Promise! Appeal for a cross-bench development policy consensus on the achievement of the 0.7% target


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© Parliamentary copyright 2012
Prepared 27 April 2012