Global Britain and the British Overseas Territories: Resetting the relationship Contents

3UK funding for the OTs

39.The UK bears contingent liability for all OTs but most of them do not receive direct financial assistance from the UK and, in theory, those that do are on a path to financial self-sufficiency. In practice, the situation is more complicated. Some OTs, such as the Cayman Islands and the Falkland Islands are self-sufficient and proud of it.72 Many others, however, are self-sufficient but in a precarious economic position without UK aid. Anguilla’s government is struggling to stimulate the economy without help; in BVI and Turks and Caicos catastrophes such as Hurricane Irma have severely impacted their economies and made them vulnerable.73 Then there are the OTs—Montserrat, Pitcairn, St Helena and Tristan da Cunha—that do receive UK financial support, in the form of official development assistance, but struggle to see how they could move beyond aid without significant investment in infrastructure. Cutting across all of this is an issue that all OTs are vulnerable to and none can tackle alone: climate change. The UK is spending money to help the OTs prepare for and mitigate the effects of climate change but many of them feel that the situation is getting worse and their capacity to manage it could be even more difficult without EU environmental funding.

Current spending on the OTs

40.UK Government spending on the OTs is complicated. Denmark provides its overseas territories, Greenland and the Faroe Islands, with annual block grants.74 The UK does not and UK spending on the OTs is spread across several government departments and cross-government funds. While the FCO does not provide a total figure and some spending is spread across several years, the evidence provided by the Department indicated that the Government will spend just over £152 million on the OTs in the financial year 2018–2019, not including a one-off figure of £70 million pledged to help territories impacted by Hurricanes Irma and Maria in 2017.75

41.In this financial year (2018–19), FCO spending on the OTs will amount to just over £23 million, not including programme spending under the cross-government Conflict, Stability and Security Fund (CSSF) in which the FCO is the sole or lead department.76 Of this £23 million, £16.3 million is from the Global Britain Fund. The FCO did not provide a detailed breakdown of this spending but said it would support “key objectives”, such as “de-mining in the Falkland Islands, operation costs for the British Indian Ocean Territory and the provision of additional disaster resilience equipment and infrastructure for vulnerable Caribbean territories”. Of the remaining FCO spending on the OTs, the largest item is the cost of running and staffing governors’ offices. In addition, Sir Simon MacDonald told us, additional funding is coming on stream to increase governors’ offices’ staffing. Lord Ahmad told us that this would amount to just under £800,000.77

42.The FCO is not the only department that spends money on the OTs, nor the department that spends the most on them. Three other departments will spend £95 million between them on the OTs: the Department for International Development (DFID) will spend £75 million; the Department for the Environment, Food and Rural Affairs (DEFRA) will spend £2.75 million; and the Ministry of Defence (MOD) will spend just under £18 million.78 In addition, £34.5 million of CSSF funding will go to the OTs, for specific programmes in Anguilla, Ascension Island and BVI (for which the FCO is solely responsible) and two cross-cutting programmes (involving the FCO as well as five other departments and arms-length bodies).

Official development assistance for the OTs

43.DFID will spend roughly £75 million in 2018–19 on programmes in Montserrat, Pitcairn, St Helena and Tristan da Cunha, which qualify for official development assistance (ODA). According to the OTs legal expert Susie Alegre, the OTs are ill-placed to engage with DFID on this because the department’s core work—eradicating poverty in aid-eligible countries—does not sit easily with the bespoke long-term needs of small OTs, which may need the kind of significant capital investment that DFID is not well-placed to deliver. She said:

On the international development question, there is a real need for clarification about what it means to be supporting the Overseas Territories that need development support, because it is not at all the same as development for developing countries and never will be. They are British territories: many of them are not going to be in the position to be standing on their own two feet with a wonderful, sustainable economy because of their size and remoteness. That is quite a difficult thing for DFID to deal with.79

44.This view appeared to be borne out in the evidence we received from Montserrat. It will receive £65 million in ODA between 2016 and 2019, making it the largest ODA recipient of the OTs. It was on a path to self-sufficiency until a series of natural disasters in the 1990s, including eruptions from the Soufrière Hills volcano, which rendered two-thirds of the island uninhabitable and decimated its economy. It has since received an estimated £450 million from the UK but there appears to be no end in sight for UK aid spending on the island. Its representative, Janice Panton, told us that the island still lacks a hospital and a year-round port and its government depends on UK aid for 60% of current expenditure. She described this as a “hand to mouth” existence, adding: “It would seem that we have been receiving funds, but we are ticking over; we are not really developing”.80 The Premier, Donaldson Romeo, also told us that “we still struggle to put in place ‘catalytic’ initiatives to spark self-sustaining, inclusive growth”.81 Joseph Eaton Farrell, a member of the opposition in the island’s Legislative Assembly, told us that there is a desire to “advance to a more financially sustainable regime as soon as possible” but, he said, this will require what he called a “development stimulus package”.82

45.St Helena, Tristan da Cunha and Pitcairn similarly need significant UK aid. In St Helena the UK recently spent nearly £300 million on an airport but the St Helena government told us that the island still has critical infrastructure gaps.83 Moreover, in its submission, the St Helena Chamber of Commerce said that local businesses invested heavily in anticipation of the airport leading to an economic boost, but this never materialised, making the situation even worse:

Raised expectations and a willingness on the part of many local enterprises to undertake significant investment in order to make a difference and be ‘air access ready’–in an attempt to grow St Helena’s economy and reduce our reliance upon aid–have turned to ashes, leaving many businesses in debt, or facing severe cash flow problems and, in some instances, both.84

Councillor Derek Thomas told us that the St Helena government’s capacity to achieve the goal of financial self-sufficiency is limited because it is not offered sufficient input into funding decisions taken by DFID officials. In the longer-term, he said, if St Helena’s economy does grow, there is a worry that it will no longer qualify for ODA but will be too poor to manage without it. He said that people on the island, “fear a future where the people of St Helena are plunged back into severe poverty, but we lack the means to safeguard against that”.85

46.Tristan da Cunha is also in a precarious financial position. Ian Lavarello, the Chief Islander, told us that its only harbour, which is its sole link to the outside world for 51 weeks a year, is not sufficiently robust to cope with Atlantic storms. He said that DFID’s policy is to “patch and mend” but that, what is needed is a new harbour, at a cost of between £80 and £90 million.86

47.Ascension Island does not receive ODA because there is no right of permanent abode. It too, however, appears to need the UK’s help. According to Councillor Kitty George, a member of the Island Council, its government “will become bankrupt in the next few years”. It has reserves of £10 million but it is spending £1.5 million of this a year due to the deteriorating economy.87 There are two reasons for this. The first is connectivity. The island has been largely cut off because its main military runway was shut for repairs in 2017 and may not be operational for several years. As a result, the Falkland Islands’ airbridge to the UK, which used to transit via Ascension, now transits via Cape Verde, leaving Ascension reliant on a monthly flight to St Helena. This has, according to Councillor George, strangled the tourism industry. Ascension’s other problem is the potential cost of enforcing a marine protected area in its exclusive economic zone, which could cost its government up to £360,000 a year.88

48.The Committee notes that the Overseas Territory of St. Helena includes the separate and distinct territories of Ascension Island and Tristan da Cunha. These are both inhabited territories with a population that is not directly connected to St. Helena and have their own identities, elected governments and flags. Therefore, Ascension Island and Tristan da Cunha should be treated with equality as British Overseas Territories in their own right and the FCO should change their status to this effect. However, this change should not necessarily imply that the practice of St. Helena, Ascension Island and Tristan da Cunha sharing the same Governor should come to an end.

Spending on the environment

49.The UK Government has devoted increased resources to OTs’ environment management in recent years, reflecting their globally-significant ecological richness.89 The RSPB told us that many OTs’ economies are “heavily dependent on natural resources”, both in terms of fishing and mineral extraction, adding that eco-tourism “is likely to be an ever-increasing component of OT livelihoods” and that “sustainable use of their natural resources is a near existential question for many of these communities”. The RSPB also argued that ecosystem-based approaches to building resilience can be cost-effective, durable and sustainable in the face of increasingly damaging hurricane seasons, but that OT governments’ capacity is limited, and they need technical and funding support from the UK Government and from NGOs in the UK.90

50.The UK Government supports environmental management and climate change mitigation in the OTs through the Darwin Plus Fund—which funds projects working on environment and climate change issues in the OTs between £100,000 and £300,000—and Blue Belt—a £20 million programme running between 2016 and 2020 aimed at implemented tailored marine management strategies.91 In its submission, the RSPB commented that there is a need for larger-scale funding.92

Brexit and EU funding for the OTs

51.Some of the evidence we received suggests that the OTs’ ability to manage their environments and mitigate the impact of climate change may be hampered by the loss of EU funding, particularly the roughly £1 million a year the OTs receive from the EU’s BEST (Biodiversity and Ecosystem Services in Territories) Initiative. The government of St Helena, for example, told us that “Protecting the environment is a key consideration for St Helena, and the EU has been instrumental in assisting in the many projects designed to do just that”. It adds that “this crucial funding must continue”.93 The government of Gibraltar told us that the UK Government “has so far failed to identify a source of funding that would fill this gap”. The BVI government said that “the EU has been critical in the provision of funding for projects focusing on climate change, disaster preparedness and the conservation of its biodiversity” and added that “the UK Government should prepare for how this unfunded liability will be met”.94 The Falkland Islands government said that it hopes to be able to continue accessing these EU funds.95

52.As well as BEST, some OTs receive aid from the EU’s European Development Fund. Dr Peter Clegg told us that they will likely incur significant losses if they are cut off from it. He said that this is true both for “relatively poor Territories such as Pitcairn and Anguilla” and for others, including BVI and the Cayman Islands, that do not qualify for ODA from the UK.96 Susie Alegre told us that OTs such as Turks and Caicos receive “significant funding from the EU for things like infrastructure and education that, at present, the UK Government would not fund”.97

The FCO’s vision for funding the OTs

53.The Government has pledged to match EU funding for the OTs up until 2020, including in the event of a no-deal.98 In terms of environmental funding, the FCO acknowledges the significance of EU funds and says it is “considering how environmental funding for OTs can best be provided following our departure”. Beyond this, the FCO told us that it plans to “review objectively the way in which the UK Government’s commitments to the OTs is most effectively discharged, taking account of the costs and benefits of the current arrangements”.99 When we asked Lord Ahmad if the UK would fund the harbour that Tristan da Cunha says is essential for the island’s survival he said:

There are various capital programmes that we receive quite regularly from various Overseas Territories, including Tristan, as you pointed out. Previously and historically, it would be fair to say that we have not perhaps looked at it as a complete overall Government approach. Most recently, I have had constructive discussions with the Secretary of State for International Development to look at the whole issue of ODA funding for our Overseas Territories, and to look at longer-term capital programmes and support.100

Following up on this, the FCO’s OTs Director, Ben Merrick, acknowledged that the cost of a harbour would be significant and that, “in the context of a business case, we look at these things very carefully from an economic point of view, and obviously a developmental point of view”.101 Lord Ahmad concluded: “if one were to say, ‘What do I aspire to as the Minister responsible for Overseas Territories?’ it is to create economies that are self-sustaining and growing”.102

54.The UK has a duty under international law to provide for the development of the OTs, but it also has a responsibility to UK taxpayers to ensure that the considerable amount of money it spends on the OTs is not wasted. This means not only transparency and accountability in day-to-day spending, but also ensuring that capital investment is genuinely capable of delivering the Government’s long-term objective to ensure that the OTs are financially self-sufficient. We are seriously concerned by evidence suggesting that, despite significant capital investment in some OTs in recent years, much more remains to be done to provide infrastructure in OTs such as Montserrat, Tristan da Cunha and St Helena, with no clear end in sight.

55.The Government must offer clarity on its long-term vision for the funding of the OTs, including replacing any lost EU funding, and continuing and expanding Blue Belt funding after 2020. Towards this end, the Government should explore options for a dedicated development and stimulus fund for the OTs, which would allow for the long-term, sustainable development of aid-dependent territories; help to stimulate the economies of those who need a stimulus but do not qualify for official development assistance; and help territories that are otherwise financially self-sufficient respond to crises such as hurricanes. This long-term vision must be based on a clear-eyed assessment of how the UK will balance the needs of individual OTs against value for money for UK taxpayers. There must be scope to ask hard questions about the long-term sustainability and viability of individual OTs without further significant levels of UK capital investment. If the Government does not think significant capital investment is possible, then it must be frank about what it will spend and towards what end.

56.The UK Government must clarify the UK’s future relationship with the European Union as soon as possible and analyse the impact on the OTs, what funding will be required to ensure the OTs are not losing out, and what input the OTs will have on the replacement of EU funding in the future.

73 The West India Committee (OTS0053); British Virgin Islands Government (OTS0079); Q165

74 Royal Danish Embassy, UK (OTS0117)

75 Foreign and Commonwealth Office (OTS0120)

76 Of the headline figure of £23 million, just under £1.8 million will be spent on the cost of running governors’ offices, £500,000 on running the OTs Directorate in London, and £4.3 million on salaries, in territory and in London.

77 Q89 [FCO budget and capacity, and annual report 2017–2018, 13 November 2018]; Foreign and Commonwealth Office (OTS0132)

78 The MOD will spend just under £18 million on the costs of running the military facilities in the British Indian Ocean Territory and the Sovereign Base Areas in Cyprus.

81 Donaldson Romeo (OTS0111)

82 Hon Joseph Easton Farrell (OTS0024)

84 St Helena Chamber of Commerce (OTS0028)

88 Ascension Island Council (OTS0119). The BBC World Service has a relay station on the island, which also supplies water and electricity. Its manager told us that the island’s connectivity issues are making it increasingly difficult for the company contracted to operate it to manage. See: Paul Mildon (OTS0121)

89 The UK Overseas Territories Conservation Forum told us that the OTs account for 94% of the biodiversity for which the UK is internationally responsible and while there are 90 endemic species in Great Britain, there are 3,300 in the OTs. The South Georgia Heritage Trust told us that the OTs in the South Atlantic are “home to the greatest density of seabirds on the planet”. See: UK Overseas Territories Conservation Forum (OTS0114); South Georgia Heritage Trust (OTS0050)

90 RSPB (OTS0070)

91 Foreign and Commonwealth Office (OTS0103)

92 RSPB (OTS0070)

93 St Helena Government (OTS0061). The importance of EU funding was echoed by a joint written submission the geographers Dr Alasdair Pinkerton from the University of London and Dr Matthew Benwell from Newcastle University. See: Dr Alasdair Pinkerton & Dr Matthew C. Benwell (OTS0069)

94 HM Government of Gibraltar (OTS0107); British Virgin Islands Government (OTS0079)

95 Falkland Islands Government (OTS0106)

96 Dr Peter Clegg (OTS0020)

97 Ms Susie Alegre (OTS0052)

98 Foreign and Commonwealth Office (OTS0132)

99 Foreign and Commonwealth Office (OTS0103)

Published: 21 February 2019