UK aid: allocation of resources: interim report Contents

Conclusions and recommendations

The new UK aid strategy

1.We welcome the new UK aid strategy’s focus on fragile states and regions, as these states and regions generally face high levels of extreme poverty. We are concerned, however, by the lack of priority given to poverty reduction within the aid strategy, and the potential implications for UK aid. This is especially a risk with other government departments, which have key aims other than poverty reduction and some of whose spending may not fall under the powers and requirements of the International Development Act 2002. Poverty reduction must be the primary purpose of UK aid spending, with other objectives surrounding security and the national interest flowing from it, rather than the other way round. We are also deeply concerned at the absence of any mention of human rights in the new UK aid strategy. (Paragraph 13)

2.The Government should make reducing poverty a legal obligation for the spending of all ODA, regardless of which department is spending it and which legal power it is being spent under, which should be made explicit in all ODA programming. DFID must re-emphasise in its Single Departmental Plan that the primary objective and requirement for UK aid is the elimination of poverty. (Paragraph 14)

3.There is a need for a more considered definition of fragility than has been used in the past, taking into account the complex causes of fragility. This, in turn, can help better direct allocation decisions. At first glance, it appears that DFID is taking a more nuanced approach in its definition, but in practice this has actually increased the number of its 28 priority countries classed as fragile states and regions from 21 to 22. Without more specific details about the calculations of fragility that DFID is making, it is difficult to pass judgement on this new definition. It is also currently unclear how the new definition will inform allocation decisions, beyond the broad 50% target. (Paragraph 19)

4.DFID should publish more complete details of its definition of fragility and specific information about how its list of fragile states and regions has been determined, including details of how the different categories of fragility will inform allocation decisions. DFID should consider the OECD’s new multidimensional fragility framework when it is released. (Paragraph 20)

5.We welcome the Government’s statement of the factors which will influence its choice of countries and allocation decisions as being the right factors. We emphasise again that foremost amongst these should be effectively achieving poverty reduction, and therefore the level of need of recipient countries and where DFID can add value. (Paragraph 22)

6.While it seems to us that the balance between multilateral and bilateral spending is broadly correct, it is still not entirely apparent how DFID determines this balance. It is clear, however, that it will be heavily informed by the results of the Bilateral Aid Review and Multilateral Aid Review, and by the new UK aid strategy. We trust that the Multilateral Aid Review will include analysis of the performance and capacity of multilaterals in-country. The reasoning behind the balance would be more evident if DFID had a published strategy for how it engages with multilaterals. Whether or not the Multilateral Aid Review suffices as a standalone strategy, rather than just an assessment and diagnostic tool, remains to be seen and we intend to return to this topic. (Paragraph 27)

7.DFID should set out clearly what criteria it uses to determine the balance between multilateral and bilateral spending, and how these criteria are then used to decide the balance. DFID should build this into a broader strategy for how it works with multilaterals in the wake of the Multilateral Aid Review. (Paragraph 28)

8.Traditional and sectoral budget support can be useful tools and give recipient countries ownership of their development. A blanket end to traditional general budget support is potentially unhelpful, as there are occasions on which it may be the most appropriate method of financing, subject to ensuring transparency and accountability. (Paragraph 32)

9.DFID should clarify which forms of budget support, if any, will continue, what its evidence base is for deciding to end traditional general budget support, and how it intends to ensure country ownership of development without it. We recommend therefore that consideration then be given as to the case for an option to give general budget support in exceptional circumstances, where systems are in place to effectively monitor transparency and accountability. (Paragraph 33)

Transparency and accountability

10.It is crucial that a change in the proportion of aid delivered by other government departments does not lead to a change in the effectiveness of that aid. Demonstrating this effectiveness requires those departments to meet the same high levels of accountability and transparency that DFID has over the past few years. The ambition for all government departments to be ranked as ‘Good’ or ‘Very Good’ in the international Aid Transparency Index is welcome, but five years is an unambitious and unacceptable timescale. (Paragraph 35)

11.The Government should commit to all government departments achieving a ‘Good’ or ‘Very Good’ ranking in the international Aid Transparency Index within two years. All departments administering UK aid should report to Parliament within two years as to their ranking and, if they have not achieved one of the above rankings, should explain why this is the case. (Paragraph 36)

12.Parliamentary scrutiny of aid spending is vital to ensure that it is spent well. We consider that we, as the International Development Committee, have a role in scrutiny of all UK ODA, both through ICAI and through our own inquiries into UK aid. We intend to exercise this function, alongside any relevant other parliamentary committees, with regards to all government departments and the National Security Council, in order to maintain a broad overall picture of all UK aid. Furthermore, we highlight the fundamental importance of ICAI in the scrutiny of UK aid and its clear mandate to scrutinise all Government aid spending, regardless of department. In order to ensure the effectiveness of ICAI’s reviews, other government departments must treat it with the same seriousness and respect that has exemplified the relationship between it and DFID. (Paragraph 41)

Capability and capacity

13.We believe that DFID has the expertise and knowledge necessary to scale-up over time and deliver sustainable development in fragile states and regions, in line with the focus of the new UK aid strategy, although we are concerned that DFID may not at present have the capacity to allocate effectively, as stipulated in the new aid strategy, “50% of DFID’s budget to fragile states and regions in every year of this Parliament”. We are reassured that DFID has been given the funds required to increase its staffing levels to administer its ODA budget. It nevertheless needs to recognise that achieving results will require a longer-term focus and greater attention on conflict prevention. DFID’s current programme lengths, posting lengths, review cycles and criteria do not operate on the timescales necessary to achieve transformative impact. (Paragraph 46)

14.To succeed in fragile states and regions, DFID should:

While this may have resourcing implications, it is important for DFID’s ability to deliver the fragile states and regions agenda itself, rather than just relying on contractors. (Paragraph 47)

15.We are not confident that other government departments currently have the capacity and experience to deliver aid to the same high standards as DFID, but developing this capacity in those departments will be of great long-term benefit. We are also concerned that a lack of clarity may exist as to which department may be leading and coordinating delivery of ODA, where a number of different departments are involved in the same region or area of work. (Paragraph 50)

16.In the short-term, DFID should assist heavily in the administration of programmes run by other government departments, for example through secondments and exchanges of staff, to maintain the quality of UK aid, accountability and transparency. In the longer-term, DFID should share its expertise with other government departments and develop their capacity to deliver ODA effectively. DFID should have oversight of all ODA delivery, including where different government departments are involved. DFID must be given the resources necessary to do this without impacting on its own work and levels of expertise. Clear statistics should be provided by all government departments providing ODA as to the proportion subject to the International Development Act 2002. (Paragraph 51)

17.DFID’s ‘non-fiscal’ target does not necessarily lead to effective poverty reduction. Due to the small number of avenues available to DFID for ‘non-fiscal’ spending, the evidence suggests that the target can force DFID to spend large amounts of money through a small number of channels, regardless of whether that money would be more effectively spent elsewhere. While we do not think that DFID should reduce its ‘non-fiscal’ spending, it needs the flexibility to allocate its own spending in line with what will best achieve its primary aim of poverty reduction. (Paragraph 54)

18.The Treasury should relax DFID’s ‘non-fiscal’ target, and grant DFID the flexibility to spend in whatever way DFID deems will be most effective. (Paragraph 55)

19.Evidence to the Committee suggests that there is still only a weak evidence in support of Payment by Results and that it can have negative consequences. We are therefore alarmed by its rapidly increasing usage, as this is not yet supported by the evidence. DFID must be very careful that the use of Payment by Results works effectively in a fragile states and regions context, with the necessary focus on real transformational change and flexibility to adapt to changing circumstances. (Paragraph 59)

20.DFID should reduce its use of Payment by Results until it has a stronger evidence base and the deeper knowledge and understanding to implement it without negative consequences. (Paragraph 60)


21.The new UK aid strategy is a welcome restatement of the UK’s strong commitment to international development. Its focus on fragile states and regions shows the Government’s willingness to work in the difficult environments where levels of extreme poverty are highest. The associated increase in cross-Government working presents an opportunity for the Government to build international development into much of what it does and to build capacity. Furthermore, the strategy puts forward a compelling argument for how achieving the 0.7% target also benefits the UK’s national interest. (Paragraph 61)

22.We have some concerns, however, about how the aid strategy was developed and how it will be taken forward. Poverty reduction has been, and should always be, the first priority of UK aid. The strategy’s status as a Treasury-led document with little explicit focus on poverty reduction risks creating an impression that the objectives regarding the UK’s national interest, and therefore security and prosperity, were drawn up first, with DFID left to connect the dots with poverty reduction. That “tackling extreme poverty and helping the world’s most vulnerable” is listed as the fourth of four strategic objectives compounds this impression and risks damaging the reputation of UK aid abroad. (Paragraph 62)

23.The most important principle of allocating UK aid should always be that it is allocated where it can most effectively be used to reduce poverty. This has many dimensions, with both the security and prosperity agenda and increased cross-Government working being worthwhile and meaningful ways of achieving poverty reduction. It is important that the thinking flows from poverty reduction to these agendas, rather than the other way round, and that allocation decisions are made in line with this. It is further important that, as other government departments become more heavily involved in UK aid, the Government is alive to the risk that the focus on poverty reduction may be weakened. (Paragraph 63)

24.The Government also needs to properly recognise the specific challenges associated with working in fragile states and regions and increasingly across Government, and respond appropriately. DFID’s focus must be how to achieve long-term transformative impact in fragile states and regions. Other government departments will require a great deal of capacity building and assistance from DFID to ensure effective aid delivery. Finally, transparency and accountability must remain as core principles of UK aid, with effective parliamentary scrutiny of all areas of ODA spend. (Paragraph 64)

© Parliamentary copyright 2015

Prepared 17 March 2016