1Introduction
UK Aid Strategy
1.In 2015, the Government published its strategy UK aid: tackling global challenges in the national interest. The strategy outlined a new cross-government approach to administering Official Development Assistance (ODA), increasing the amount of ODA administered outside of the Department for International Development (DFID) and broadening the number of implementing departments. It stated:
DFID will remain the UK’s primary channel for aid. But to respond to the changing world, more aid will be administered by other government departments, drawing on their complementary skills.1
The strategy also contained a commitment to reform the ODA rules, stating that:
The government will continue to work closely to modernise the definition of ODA at the OECD, ensuring it reflects the breadth of the new international development agenda set by the new UN Global Goals, and fully incentivises other countries to meet these goals.2
Objectives of the UK Aid Strategy
- Strengthening global peace, security and governance
- Strengthening resilience and response to crises
- Promoting global prosperity
- Tackling extreme poverty and helping the world’s most vulnerable
Definition
2.Under the International Development (Official Development Assistance Target) Act 2015, the UK Government is committed to spending 0.7% of Gross National Income (GNI) on ODA. The definition of ODA is determined by the OECD’s Development Assistance Committee (DAC). The DAC defines ODA as those flows to countries and territories on the DAC List of ODA Recipients, and to multilateral institutions, which are:
a)provided by official agencies, including state and local governments, or by their executive agencies; and
b)each transaction of which:
i)is administered with the promotion of the economic development and welfare of developing countries as its main objective; and
ii)is concessional in character and coveys a grant element of at least 25 per cent (calculated at a rate of discount of 10 per cent).
The DAC List of ODA Recipients includes all low-income countries and almost all middle-income countries (the only exceptions are Romania and Croatia on the grounds of EU membership; and Russia on the grounds of its membership of the dormant G8).
3.A small amount of DFID spending is not ODA-eligible. This includes support to the Overseas Territories (the International Development Act 2002, which governs all DFID spending, requires DFID to provide such assistance irrespective of whether such territories are ODA-recipient); and humanitarian assistance to countries which are not ODA-recipient.
4.The Conservative Party’s 2017 election manifesto stated that:
We do not believe that international definitions of development assistance always help in determining how money should be spent, on whom and for what purpose. So we will work with like-minded countries to change the rules so that they are updated and better reflect the breadth of our assistance around the world.3
Legislation
5.Under the International Development Act 2002, ODA provided by DFID (indeed all DFID spending with the exception of (i) humanitarian assistance in high-income countries; and (ii) support for the Overseas Territories) must be “likely to contribute to a reduction in poverty.” ODA provided by other departments is not explicitly subject to the requirements of the Act, though the Government’s view is that all ODA provided by cross-Government funds (though not necessarily that provided by departments other than DFID) meets the requirements in practice. However, “likelihood of poverty reduction” is not clearly defined; this gives wide discretion to Ministers in how aid is spent by their department”.
6.Further to the International Development Act and the OECD DAC definition, the 2014 amendment to the Act added the duty to consider gender equality and the International Development (Official Development Assistance Target) Act 2015 enshrined the 0.7% commitment into law.
7.Additionally, the UK has reaffirmed its commitment to the Sustainable Development Goals, with their universal call to end poverty. The Government has also committed not to tie aid (i.e. not to make UK aid conditional on being spent on goods and services from UK companies).
Who spends ODA?
8.When DFID was first established, it was responsible for the entirety of the UK ODA spend. By the end of the Labour Government in 2010, this had shifted slightly, with just over £450,000 of the £8.5 billion aid budget being spent by other departments (such as through the cross-government Conflict Pool, predecessor of the current Conflict, Stability and Security Fund (CSSF)). When the UK hit the 0.7% of GNI target for official development assistance (ODA) spending in 2013, DFID was still responsible for administering nearly 87.8% of the aid budget, with an increased number of other departments spending small amounts. At that point, the predominant other ODA-spending was via the Conflict Pool, the Department of Energy and Climate Change and the Foreign and Commonwealth Office. The DFID proportion continued to fall over the subsequent two years so that, over the entire 2011–15 spending review period, DFID was responsible for spending about 85% of the total UK ODA spend.4
9.According to the Government’s official ODA statistics for 2016, DFID spent 73.8% of the UK’s total ODA (down from 80.5% in 2015). As a result, ODA spent by other government departments (OGDs) rose from 19.5% in 2015 to 26.2% in 2016.5 The table below shows the breakdown by department.
10.The nature of ODA spending differs considerably between DFID and other government departments. 95% of DFID’s bilateral ODA spending in 2015 resulted in a transfer of cash, technical cooperation or commodities to developing countries, whereas 52% of FCO ODA and 93% of Home Office ODA was spent on administrative costs (e.g. relating to diplomacy or on in country refugee costs).6
11.The Department for Business, Energy and Industrial Strategy (BEIS) is currently the largest non-DFID spender of ODA. BEIS’ ODA spend aims to support the goals of the UK Aid Strategy by,
reducing poverty by generating and putting into use technology to address global development challenges which affect the poorest people and countries7
The largest amount of BEIS ODA is apportioned to the International Climate Fund (ICF), which aims to “deliver the UK’s commitment to spend at least £5.8bn in climate finance from 2016 to 2020.”8 BEIS also has two major research funds: the Global Challenges Research Fund, which is worth £1.5bn from 2016 to 2021 and funds UK research and innovation to tackle global development challenges; and the Newton Fund, which has £585m for 2016 to 2021 and funds science and innovation partnerships with developing countries.9
12.The Foreign and Commonwealth Office is set to administer an increasing share of ODA and become the largest non-DFID ODA administering department, chiefly due to its responsibility for two significant funds, the Prosperity Fund and the Conflict, Security and Stability Fund (CSSF) (further information on the cross-government funds is given below). In written evidence, the FCO states that its ODA:
is primarily focused on delivering three of the four pillars of the strategy (strengthening global peace, security and governance; strengthening resilience and response to crises; and promoting global prosperity).10
The FCO states that the primary element of its ODA is aid-related frontline diplomatic activity which it says “makes an important contribution to the achievement of the UK’s development objectives overseas”.11 FCO ODA also includes contributions to international organisations, such as the British Council and the BBC World Service.
The Cross-Government Funds
13.The National Security Council oversees two cross-government funds: the Conflict, Stability and Security Fund (CSSF) and the Prosperity Fund, which use both ODA and non-ODA eligible funds. A very substantial proportion of UK ODA spending is channelled through these funds, with CSSF alone ranked as the third largest non-DFID administrator of ODA.12
14.The CSSF aims to promote the economic development and welfare of developing countries by strengthening peace and resilience where there is actual, or a risk of, conflict and instability (aligning with national security objectives of “Protect our People” and “Project our Influence”).13 In 2016, the CSSF’s total budget was £1.127bn, of which £600.9m was spent on ODA-eligible activities.14
15.The Prosperity Fund aims to support the economic growth and reform needed for development, aligning with the objective to “Promote our Prosperity”.15 The Fund’s secondary aim is to create opportunities for international business, principally for UK companies. The Prosperity Fund’s main geographic focus lies with Middle Income Countries (MICs) who are DAC recipients such Colombia, India and South Africa. In 2016 the Fund spent £38m that was ODA-eligible.
16.From April 2018 the funds have been administered through a new Joint Funds Unit, based in the Foreign and Commonwealth Office. The main function of the Unit is to provide “oversight and advice on the respective Fund portfolios” with individual programmes delivered within Departments or at Posts.16 Ultimate ownership of the funds sits with the Minister for the Cabinet Office who chairs a newly established Ministerial Committee, comprising of Ministers from ODA-spending departments. The Government states that these funds “enable the UK Government to use ODA flexibly to respond to the constantly changing global landscape”.17 The Government argues that interventions undertaken through these funds in supporting fragile states and driving prosperity “are not just right morally–they are firmly in our national interest”.18 The use of ODA through the funds has attracted substantial criticism which is explored further in this report.
International comparison
17.We found that a growing share of ODA spent through government departments other than the main aid agency is not an uncommon trend in international terms. In Switzerland, 38.0% of ODA spending in 2016 was by departments other than the Swiss Agency for Development and Cooperation, and, in Canada, 21.4% was delivered by government bodies other than Global Affairs Canada in 2015–16.19 In Sweden (which spends 1% of GNI annually on ODA), only roughly half of ODA spending was managed by Sida (the Swedish government authority for development cooperation). The majority of other ODA eligible expenditure was undertaken via its Ministry for Foreign Affairs.20 The UK is the only DAC donor to have an independent government department headed by its own senior minister to administer ODA.21
1 HM Treasury and Department for International Development UK Aid: Tackling Global Challenges in the National Interest (November 2015) para 2.13
2 Ibid, para 2.15
3 Conservative and Unionist Party, Forward, Together: Our Plan for a Stronger Britain and a Prosperous Future, 18 May 2017
4 Department for International Development, Statistics on International Development 2015
5 Department for International Development, Statistics on International Development 2017 (November 2017)
8 Ibid para 15
9 Ibid para 7
11 Ibid
12 Department for International Development, Statistics on International Development: Provisional UK Aid Spend 2017 (April 2018)
14 HCWS123, 21 July 2016; Department for International Development, Statistics on International Development 2016 November 2017
15 HM Government, National Security Strategy (2015) para 4
16 National Security Secretariat evidence TBC, Q4
17 HM Government, National Security Strategy (2015) para 1
18 Ibid
21 Nilima Gulrajani, Merging Development Agencies. Overseas Development Institute. January 2018 page 3
Published: 5 June 2018