Definition and administration of ODA Contents

4Objectives - Poverty reduction and national interests

91.In keeping with the UK Aid Strategy, poverty reduction should be the central pillar of UK ODA spending. However, evidence submitted to us has suggested that ODA programmes administered by other government departments are not always targeted adequately towards poverty reduction and some existing departmental activities, with only marginal poverty reduction purposes, are being badged as ODA.83 Indeed, in oral evidence to us, even the Secretary of State for International Development expressed her concern about spending outside of DFID:

I am not going to say that the cross-Government funds or spending that has been going on in other Government Departments is good.84

92.We heard extensive evidence about the development of “dual purpose” aid, whereby a development objective forms the primary objective of an ODA-eligible activity accompanied by a secondary national interest objective, such as increasing trade or protecting national security. We considered whether dual objectives create inherent tension in these programmes and whether secondary national interests risk eclipsing the primary aim of reducing poverty. This concern was most prominent in our evidence relating to the cross-government funds.

Prosperity Fund

Priming markets

93.Evidence to our inquiry highlighted concerns about the use of ODA for the promotion of UK trade relationships. The Prosperity Fund cites its primary objective as poverty reduction and development in partner countries with a secondary benefit of the creation of opportunities for business, including UK business. The Fund’s website heavily references opportunities for UK business and “our new trading partners of the future”.85 Evidence to the inquiry expressed concern about this emphasis, with NGO coalition Bond stating,

It is worrying to see so much reference to UK companies in the Prosperity Fund report. Once you open that up as an acceptable way, that counts as a priority equally with poverty reduction … the choice of countries very much looks at countries that would be important in a post-Brexit scenario.86

In written evidence, Oxfam’s analysis suggested that around 20% in value terms of the Prosperity Fund’s projects in 2016/17 involved explicitly promoting the capabilities of UK entities alone and that half of all projects in China involved explicitly showcasing the capabilities of UK entities and promoting UK-China collaborations.87 This raises concerns about the potential to lead to tied aid, with the receipt of aid dependent upon granting the UK trade partnerships. This concept was enshrined formally in the ‘Aid and Trade Provision’ of the late 1980s and heavily discredited in a series of issues culminating in the Pergau Dam scandal.

94.In oral evidence, Dr Emma Mawdsley added that the dual purpose of the Prosperity Fund risks diluting both aims:

We look at the Prosperity Fund and others, and I share the primary concern: “Is it achieving poverty reduction?” There is another side to it and it seems that here it is: “Are we actually achieving the other thing that it is meant to achieve, the secondary benefits of supporting UK or international trade and businesses?” It seems to me that it is neither fish nor fowl.88

95.The heavy emphasis of the Prosperity Fund upon promoting UK trade risks losing the rightful emphasis of the Fund upon the primacy of poverty reduction, and is a step towards the return of tied aid.

Geographical focus

96.The Prosperity Fund focuses upon MICs including Brazil, China, Mexico and India. 73% of the world’s poorest people live in MICs89 and 76% of poor people in the Asia Pacific region live in rural areas, mostly involved in agriculture.90

97.The FCO defended the importance of departments other than DFID undertaking ODA eligible work in MICs:

The work we are doing, which is done in a very integrated way, recognises the fact that we all bring different strengths to this broad range of aid work. Of course, there are the specific countries in extreme poverty that DFID deals with, but there are a range of other countries that are still suffering from elements of poverty. It is absolutely right that the skills that the Foreign Office brings to bear are applied there, just as the skills of BEIS and other Departments are.91

98.As a case study, we examined ODA spending in China. The Secretary of State for International Development told us:

We do spend some money in partnership with China, but it is not benefiting China. We work on global health initiatives together in partnership. We like doing that because we think we can shape what they do, but it is not through their Government. We might do things, for example, with research institutes, but it is pretty small sums of money. Other Departments do work with China.92

99.However, this does not fit with examples of other government department-administered projects we learned about. UK ODA programmes are providing direct benefits to China. Some of these projects, for example BEIS spending on earthquake resilience and climate change research, demonstrated a clear development focus. However, other projects we uncovered had much weaker focus on development, such as projects to reduce tobacco consumption by migrant workers and to reduce salt intake by Chinese children.93

100.The FCO told us that:

UK ODA to China now focuses on areas where the UK can provide policy and commercial expertise in support of inclusive economic growth and development, working on global issues in a mutually beneficial way.94

Amongst the FCO-administered Prosperity Fund projects, we found many weaker examples including projects to develop the Chinese film industry, improve the Chinese museum infrastructure and improve the credit bond rating system in China.95

101.It is unclear to us how these types of interventions will benefit the very poorest people; both those living in the countryside and the urban poor. We acknowledge the importance of providing ODA to MICs, where 73% of the world’s poorest people live. However, we are concerned to have uncovered Prosperity Fund projects within MICs which show inadequate, or negligible, targeting at improving the lives of the very poorest and most vulnerable communities in these countries. We are also concerned by the disconnect between DFID’s intention to use ODA in China for broader development benefit compared to the activities of other departments and the reality of what spending is being badged as ODA.

102.Prosperity Fund programming should be targeted at helping the very poorest. Accordingly, we recommend that Prosperity Fund programmes should have a particular focus upon development in rural areas and the urban poor to transform the lives of the very poorest people in MICs. In the light of our concerns, we recommend that existing programmes should be reviewed.

Conflict, Stability and Security Fund

103.We are also concerned that the choice of countries receiving ODA through the CSSF is being governed primarily by national security interests rather than the potential to reduce poverty. The recent National Security Capability Review includes a commitment to increase efforts on security and justice as part of the UK’s development agenda,96 which the Government argues will reduce the insecurity which drives extremism and other security threats. In written evidence, Save the Children told us:

The criteria for establishing priority countries for the CSSF are the level of instability and the level of UK interest, rather than considerations about need in these countries. While stability is an important aspect of development, these sole priorities suggest that the CSSF does not have “promotion of the economic development and welfare of developing countries” as its main objective.97

104.Furthermore, John Gaventa from the Institute of Development Studies told us that “simply addressing security does not mean that you are going to reduce poverty”98 and that a holistic approach is needed to tackle underlying issues within these countries such as unemployment and education. Both the Prosperity Fund and CSSF will outline which SDGs are being met in their Annual Reports from 2018/19 onwards. The SDGs have been built into the Prosperity Fund’s theory of change, but this has not yet been implemented for the CSSF.99

105.We note the value of spending ODA in fragile and conflict affected states to promote peace and stability. We also acknowledge that CSSF programming offers the potential to deliver dually beneficial outcomes of increasing national security whilst also reducing poverty. However, selecting countries based upon security rationale alone risks side-tracking the primary aim of poverty reduction.

106.The choice of countries for ODA CSSF projects must be led first and foremost by the aim of reducing poverty. To this end, ODA CSSF programmes must contain a detailed theory of change outlining how they will directly contribute to a reduction in poverty. These theories of change should be revisited and assessed during mid-term reviews and programmes adjusted if necessary.

107.The Government states that the money spent on the CSSF cannot be spent anywhere better for ODA and following the ICAI report we are not convinced that this is the case. We therefore recommend a review of the continuation of the CSSF in its current form.

FCO ODA and Diplomatic Interests

108.The FCO states that the primary element of its ODA is Frontline Diplomatic Activity (FDA), costs associated with diplomatic administration connected to development, which it says “makes an important contribution to the achievement of the UK’s development objectives overseas”.100 FDA is permissible in ODA-eligible states and consequently charged in 127 Posts. The FCO told us:

The OECD Development Assistance Committee’s (DAC) statistical ODA directives state that costs related to diplomatic staff assigned wholly or in part to aid-related duties may be scored as ODA (paragraph 80). In line with these directives and the practice of other DAC members, the FCO captures the ODA-eligible administrative costs borne by its diplomatic network as part of the UK’s operational delivery of development assistance in DAC-listed recipient countries. The costs are incurred by the FCO network directly in the developing country, centrally by staff based in the UK, or from another regional country where services are provided to a developing country in which the UK has no permanent presence.101

109.In 2017, FDA accounted for £173m of the FCO’s provisional ODA spend.102 This represents 8.9% of its total budget. FDA covers staffing, estate maintenance and other operational costs in accordance with DAC rules (for example, as consular activities are not permissible, these costs are excluded when calculating the amount of ODA spent). It also includes diplomatic engagement on ODA activities; for example, in China this includes lobbying on human rights issues including the death penalty and encouraging China to meet international commitments on issues such as the illegal wildlife trade.103

110.We are concerned that the use of ODA for administrative purposes is misdirected and that in some cases existing diplomatic activities are being badged as ODA without any additional targeting to lead to a reduction in poverty.


111.The Government’s explicit strategy to increase the proportion of ODA administered by other government departments presents opportunities and risks. The benefit identified by the Government is harnessing relevant expertise, resources and networks available in another department to enhance development projects in the policy area of that department. There may also be promotion of a development focus across Whitehall. However, the risk identified throughout our evidence is the reverse, that other departments’ priorities will dilute or damage ODA’s primary purpose which is poverty reduction for the poorest, most vulnerable and marginalised and ensure that DFID has oversight of all ODA spending.

112.At worst, programmes administered with dual objectives (notably the cross-government funds) risk delivering on neither their primary poverty reduction purpose, nor their secondary national interest objective. ODA must be directed primarily at reducing poverty, helping the very poorest and most vulnerable rather than being used as a slush fund to pay for developing the UK’s diplomatic, trade or national security interests. ODA eligibility should not be a question of meeting a threshold or badging activities as part of a mandatory spend to protect departmental budgets during a time of austerity. Rather, departments should be actively identifying how they can apply their unique skillsets and expertise to deliver high quality development programming which enhances the quality and effectiveness of UK aid even further.

113.To ensure the primacy of poverty reduction as an objective for all UK ODA, ODA spending departments should conform in practice with the terms of the International Development Act 2002. All ODA programming should contain theories of change which explicitly link to the SDGs. The Government should make systematic improvements to coherence, transparency and - most crucially–the poverty focus of cross-government fund projects before increasing their share of UK ODA any further, and ensure that DFID has oversight of all ODA spending.

83 For example, Oxfam ODA0025

85 Cross-Government Prosperity Fund Accessed 8 May 2018

88 Q69 [Dr. Emma Mawdsley]

90 International Fund for Agricultural Development, Rural Development Report 2016. Page 108

93 Department for International Development Statistics on International Development 2017, Data underlying the SIDs

94 Foreign and Commonwealth Office Annex A ODA0041

96 HM Government National Security Capability Review, March 2018, page 41

98 Q19 [John Gaventa]

102 Ibid

103 Ibid

Published: 5 June 2018