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Effectiveness of UK aid: interim findings Contents

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2UK aid spending and the UK aid strategy

What counts as aid

6.The UK Government voluntarily adheres to an internationally recognised definition of aid—Official Development Assistance (ODA). ODA was established by the Organisation for Economic Cooperation and Development’s (OECD’s) Development Assistance Committee (DAC), of which the UK is a member and to which it reports its aid spending.

• ODA is designated as assistance given “with the promotion of the economic development and welfare of developing countries as the main objective”. For assistance to be counted as ODA, recipient countries must be designated by the DAC as low or middle income.11
• UK aid is also bound by the parameters set in the International Development Act 2002 that put poverty alleviation at the heart of the UK aid programme.12

7.In recent years, some commentators and Government ministers have suggested the definition of what constitutes aid should be broadened or changed to align more with Britain’s national interests and respond to changing global conditions, such as the growing influence of China.13 This Committee’s predecessor cautioned against the UK developing and using its own definition of ODA.14 That caution was echoed in written evidence from former Secretaries of State for International Development, Andrew Mitchell MP and Hilary Benn MP.15

8.In oral evidence to this inquiry, the Secretary of State for International Development, Anne-Marie Trevelyan MP, reaffirmed the Government’s commitments to spending 0.7% of Gross National Income (GNI) on international development; as defined by the OECD DAC and the provisions of the International Development Act 2002. However, the Secretary of State added that the Government’s Integrated Review of Security, Defence, Development and Foreign Policy offered an opportunity for a conversation with fellow DAC members about what is and what is not ODA eligible, particularly within the climate change space and the funding of peacekeeping.16 17

9.The Committee welcomes the Government’s commitment to spending 0.7% of Gross National Income (GNI) on aid, keeping within the current international rules-based consensus of the OECD’s DAC definition, and preserving the primary focus of UK aid upon poverty reduction.

UK aid strategy

10.In November 2015, the Department for International Development (DFID) and HM Treasury published a new strategy for the UK’s spending on overseas aid - UK aid: tackling global challenges in the national interest.18 The strategy:

• reaffirmed the UK’s commitment to tackling extreme poverty, helping the most vulnerable and meeting the Sustainable Development Goals;
• proposed that, while DFID would remain the UK’s primary channel for overseas aid, a greater proportion of it would be administered by other government departments (OGDs) and through cross-government funds such as the Conflict, Stability and Security Fund (CSSF) and the Prosperity Fund. The Government made this decision as it wanted to draw on skills across government when spending ODA to respond to challenges such as mass migration and the impacts of global warming.19 The Government expects that the proportion of ODA not spent by DFID will represent up to 30% by 2020, compared with 20% when the strategy was published; and
• introduced a more explicit focus on using UK aid to promote mutual prosperity and the national interest.20

DFID is in the process of refreshing the 2015 UK aid strategy, but no date has yet been set for its publication.

11.The UK aid strategy sets out the priorities and principles against which UK aid spending should take place. The refreshed aid strategy will shape ODA expenditure beyond 2020 and should be an important building block in the Government’s forthcoming Comprehensive Spending Review (CSR). Therefore, it is crucial that the refreshed Strategy is in place before the next CSR so that the UK’s aid outputs are based on strategic planning rather than fitting around Whitehall budgets.

12.The focus on using aid to enhance mutual prosperity appears to have intensified in recent years, with some government documents explicitly linking mutual prosperity to the ‘Global Britain’ agenda to reposition the UK internationally and build ties with a wider range of countries.21 In the opinion of many witnesses to this inquiry, the pursuit of narrowly-defined economic or foreign policy goals can create a tension with UK aid’s other objectives, such as poverty reduction.22 In oral evidence, Dr Emma Mawdsley told us that the risk of trying to trying to combine economic diplomacy and poverty reduction is that neither objective is done very well.23 James Rogers, in written evidence, put the counter argument that “Britain should not be afraid of using its ODA resources to reinforce its national interests, particularly given that altruism and interests can intersect”.24

UK aid spending and the 0.7% target

13.The UK spent £15.2 billion on ODA in 2019,25 equivalent to 0.7% of the UK’s GNI.26 (Figure 1.) The UK’s commitment to spend 0.7% of GNI is legally binding through the International Development (Official Development Assistance Target) Act 2015. The UK has met the 0.7% target for seven consecutive years since 2013.27 The UK continues to be one of a handful of countries that spends 0.7% of its GNI on ODA.28

• DFID is the biggest spender of ODA of any UK government department. In 2019, it spent £11.1 billion of ODA with the remainder split between OGDs and other payments and attributions.29
• The top ODA-spending OGD in 2019 was the Department for Business, Energy and Industrial Strategy (BEIS, with lead responsibility for climate change) which spent £0.95 billion (6.3% of the total ODA budget) followed by the Foreign and Commonwealth Office (FCO), £0.68 billion (4.5%). The next biggest spender of ODA was the cross-government CSSF which spent £0.66 billion (4.4% of total ODA budget).30

Figure 1: Annual UK Official Development Assistance (ODA)expenditure by source,
2014 to 2019

Note: Non-departmental ODA spending includes EU attribution (non-DFID), Gift Aid and the BBC World Service.

Sources: Statistics on International Development: Provisional UK spend 2019, DFID Apr 2020; and ICAI follow-up review of 2017–18 reports, ICAI Jul 2019, Figure 3

Channels through which UK aid is spent

14.Bilateral aid—aid provided for specific countries, regions or programmes—makes up the majority of the UK’s overseas aid spending.

• Of the £15.2 billion that the UK spent on aid in 2019, £10.1 billion (67%) was spent bilaterally; and £5.1 billion (33%) was spent as core contributions to multilateral organisations such as the World Bank International Development Association.31 (Figure 2 shows DFID’s multilateral ODA expenditure in 2018 by recipient.)
• Between 2014 and 2018 (the latest years for which detailed ODA spending data is available), the share of ODA represented by bilateral spending through multilateral channels remained fairly constant at around 18% of total ODA. Over the same period, the share of aid spend that went through bilateral only channels increased from 40% to 44%.32
• The UK spent £1.5 billion of bilateral ODA on humanitarian assistance (10% of total UK ODA), representing an increase of £0.2 billion compared with 2018. This was driven in part by UK responses to humanitarian crises in, for example, Yemen.33
• Bilateral aid also includes capital injections into CDC Group, the UK’s Development Finance Institution (DFI). DFID invested some £0.7 billion in CDC in 2018–1934 and plans to increase this to almost £1 billion in 2019–20.35
• The vast majority of UK aid is disbursed via “trusted partners” such as NGOs and contractors. A very small amount of UK aid (approximately £15 million) is provided as budget support direct to recipient governments.36

Figure 2: The UK’s multilateral Official Development Assistance expenditure in 2018 by recipient

Note: European Commission Institutions include a specific contribution to the European Development Fund and attributions to the EU development budget; other multilateral institutions include global funds to fight AIDS, Tuberculosis and Malaria; and UN agency or fund includes the UN Refugee Agency and the World Food Programme.

Source: Statistics on International Development, Final UK Aid Spend 2018, DFID Sep 2019, Additional tables, Table A8 (Data for 2019 is not yet available)

The changing profile and nature of UK aid

15.Shifts in the UK’s international development priorities have been accompanied by changes in the spending profile of UK aid. Since 2014, DFID’s share of total ODA spending has reduced from 86% to 73%.37 At the same time, there has been a growing focus on middle-income countries.38

Shifts in the UK aid spending portfolio

16.In recent years, the amount of aid spent outside DFID has scaled up rapidly.

• Between 2014 and 2019, the share of non-DFID aid spending increased from £1.6 billion (14%) in 2014 to £4.1 billion (27%) in 2019. (Figure 1.) In written evidence, the Independent Commission for Aid Impact (ICAI) stated that the amount of non-DFID aid is now larger than the aid budgets of mid-size donors such as Canada and Norway.39
• Between 2018 and 2019 alone, the amount of ODA spent by the cross-government Prosperity Fund leapt by 87% from £94 million to £175 million;40 and Home Office ODA spending increased by 34%, from £337 million to £452 million.41 In oral evidence, Nick Dyer, DFID’s Acting Permanent Secretary told the Committee that the increase in Home Office ODA expenditure was due to a rise in spending to support asylum seekers in the UK, primarily reflecting an increase in Asylum Support volumes in 2019 in comparison to 2018. Under OECD DAC rules, such spending is eligible to be classified as ODA but for one year only.42

Aid spending in middle income countries

Bilateral aid spending on middle-income countries

17.While the majority (55%) of the UK’s bilateral aid spending went to Least Developed and Other Low-Income Countries in 2018, the share of the UK’s bilateral aid expenditure spent in countries classified as ‘middle income’ increased in absolute terms (from £1.5 billion to £2.0 billion) and as a proportion of bilateral ODA expenditure (from 36% to 45%) between 2014 and 2018.43 (Figure 3.)

Figure 3: Total bilateral Official Development Assistance expenditure by country income classification, 2014 to 2018

Source: Statistics on International Development, Final UK Aid Spend 2018, DFID Sep 2019, Table 7 (Data for 2019 not yet available)

Share of UK aid spend by country and income group

18.There is also a marked difference in where DFID and other government departments and cross-government funds spend aid:

• DFID concentrates its assistance in 33 priority countries. Most are poor countries in sub-Saharan Africa. It also supports several South Asian countries (Afghanistan, Bangladesh, Myanmar, Nepal and Pakistan), runs major humanitarian programmes in the Middle East and has a partnership on climate change with Indonesia.44
• Non-DFID aid has a very different geographical profile, with around three-quarters going to middle-income countries, including China, India and South Africa, pursuing priorities such as reducing carbon emissions, tackling insecurity, building research partnerships and promoting trade and investment ties with the UK.45
• UK aid bilateral aid spending in China and India amounted to around £150 million in 2018.46 ODA interventions in China include projects to reform the business environment and research grants. It also continues to be used to fund activities to counter the illegal wildlife trade, including a project to encourage shoppers not to buy products made with pangolins. ODA to India includes interventions focused upon infrastructure, transport and clean energy.47
• In 2018, DFID spent 62.5% of its country-specific aid in Least Developed Countries (LDCs).48 For non-DFID aid, this proportion was 25.7%, including 21% for BEIS, 17% for the FCO and none for the Prosperity Fund.49 A growing share of UK aid goes towards upper middle-income countries, including 43% from FCO, 49% from BEIS and 89% from the Prosperity Fund (see Figure 4). In its 2019 report into ‘Global Britain and South America’, the Foreign Affairs Committee expressed concern that the growth in FCO-administered ODA, targeted at middle income countries, meant that “budgets may be being allocated to Posts primarily on the basis of their eligibility for Official Development Assistance (ODA), and that this is skewing continent-wide policy priorities and local expenditure.”50

Figure 4: Top ten recipients of DFID and non-DFID aid, 2018

Source: Independent Commission for Aid Impact (ICAI), EUA0028

Figure 5: Share of net-Official Development Assistance (ODA) across country income groups, DFID and non-DFID, 2018

Note: LDCs = least developed countries (plus Zimbabwe). LMICs = lower middle-income countries. UMICs = upper middle-income countries. Country classifications are from the OECD: link. Source: Statistics on International Development: Final UK Aid Spend 2018, DFID, September 2019, link.

Source: Independent Commission for Aid Impact (ICAI), EUA0028

19.In recent years, the UK aid budget’s focus has shifted towards middle-income countries that are primarily of interest to the UK from a security, climate change or economic perspective. This shift is driven by non-DFID UK aid spending. To ensure that UK aid is used as effectively as possible, the Government must direct ODA to countries where there is the greatest likelihood of reducing poverty. Accordingly, it should review the growth in ODA directed to middle income countries to ensure that these interventions are helping the world’s poorest and most vulnerable people.

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