The Newton Fund review: report of the Sub-Committee on the work of ICAI Contents

2The Newton Fund review: report from the Sub-Committee on the work of ICAI

Background

5.In June 2019, the Independent Commission for Aid Impact (ICAI) published a performance review of the Newton Fund,4 a £735 million dual-purpose fund administered by the Department for Business, Energy & Industrial Strategy (BEIS) and entirely funded by Official Development Assistance (ODA).

Box 1: Definition of ODA

ODA, often referred to as ‘aid’, can be defined as “the internationally agreed criteria for funds provided to developing countries or multilateral institutions to fight poverty and promote development. To count as ODA, an activity must promote the economic development and welfare of developing countries as its main objective. The ODA criteria are set by the OECD’s Development Assistance Committee (DAC), which is a group of 29 donors, including the UK.’’

Under the International Development (Official Development Assistance Target) Act 2015, the UK is committed to spend 0.7% of Gross National Income as ODA.

Source: HM Government, ‘Official Development Assistance’, Policy Paper, accessed 22 May 2020

6.The Fund’s purpose is “to develop science and innovation partnerships that promote the economic development and social welfare of partner countries.’’5 Before the Newton Fund was launched in 2014, it was originally conceived as the Emerging Powers Opportunities Fund whose purpose was to “support research collaboration with countries of increasing strategic importance to UK scientific and wider public policy objectives.’’6 The Government then decided to repurpose it as a 100% ODA-funded instrument whose primary purpose is the economic welfare and development of partner countries and its secondary purpose is developing science and innovation partnerships that are in the UK’s national interest. The Fund is part of the Government’s commitment to spend 2.4% of GDP investment in research and development by 2027.

7.The Fund originally consisted of £75 million each year for 5 years. In the 2015 UK Spending Review, the Government decided to extend and expand the fund from 2019 to 2021 and to £150 million per year by 2021, resulting in a £735 million investment by 2021. The Fund relies on a matched funding model which means it requires matched contributions (in funding or in kind) from partner countries.

8.Using its longstanding scoring system, ICAI awarded the Fund an Amber/Red score, indicating “unsatisfactory achievement in most areas, with some positive elements”.

Box 2: ICAI’s review scoring system

ICAI’s review scores range from Green to Red where:

  • Green means “Strong achievement across the board. Stands out as an area of good practice where UK aid is making a significant positive contribution.”
  • Green/Amber means “Satisfactory achievement in most areas, but partial achievement in others. An area where UK aid is making a positive contribution, but could do more.”
  • Amber/Red means “Unsatisfactory achievement in most areas, with some positive elements. An area where improvements are required for UK aid to make a positive contribution.”
  • Red means “Poor achievement across most areas, with urgent remedial action required in some. An area where UK aid is failing to make a positive contribution.”

Source: ICAI, ‘How we work’, accessed 22 May 2020

9.The Commission made six recommendations to the Department aimed at addressing its overall findings against three tests:

Box 3: ICAI’s six recommendations to BEIS

“As the Newton Fund is 100% ODA, BEIS should ensure that the Fund increases its focus on achieving its primary purpose, which is to meet the development needs and priorities of its partner countries. It should require improved ODA compliance and assurance processes across delivery partners.

The Newton Fund should ensure it meaningfully considers options for reducing gender inequality and reports against its progress.

Given that the UK is committed to untying 100% of its aid and reports its aid as fully untied, BEIS should ensure that the funding practices of the Newton Fund comply with both the letter and the spirit of the untying commitment.

BEIS should improve the governance and accountability of the Newton Fund and put in place a strategy setting out how it will maximise development impact as its primary purpose.

BEIS should improve the Newton Fund’s approach to and measurement of value for money.

The Newton Fund should improve its approach to monitoring, evaluation and learning at the Fund level.”

Source: ICAI, The Newton Fund, a performance review, p. iii

Conduct of scrutiny

10.Disruptions to the parliamentary calendar prevented our predecessor ICAI Sub-Committee from taking oral evidence on this review in 2019 within the usual timeframe. Following the re-establishment of select committees in March 2020, we planned to have an evidence session with BEIS, ICAI and one of the Fund’s delivery partners, UK Research and Innovation (UKRI), on the findings of the review as soon as possible. However, these plans were hampered by the announcement of social distancing, the ‘lockdown’ and other measures that formed the UK’s response to the 2020 coronavirus pandemic. To avoid further delays to scrutiny of this important review, we decided to conduct our gathering of further evidence in writing, and we sent a list of questions to our three witnesses at the end of March.8 We are very grateful for their responses which we received a few weeks later and were provided during unprecedented times.

11.To inform our analysis, we also looked at work undertaken by the previous Public Accounts Committee,9 the previous International Development Committee,10 and by the National Audit Office11 and ICAI12 on the administration of ODA by other Departments than the Department for International Development (DFID).

Evidence

12.We asked ICAI and BEIS to send us further evidence in light of some of the discrepancies between ICAI’s recommendations and the Department’s official response to the review.13 As a result, our questions to ICAI were aimed at clarifying their views on:

a)the adequacy of the Government’s response;

b)the Government’s overall performance in administering dual-purpose funds;

c)the Fund’s compliance with the OECD-DAC rules on untied aid;

d)the inherent risks of the matched funding model; and

e)the Department’s ability to monitor impact, learn and adapt.

13.Meanwhile, we asked the Department to explain further:

a)what progress had been made with the five actions it had committed to take in response to ICAI’s review;

b)whether the Fund’s extension after 2021 had already been confirmed;

c)what progress had been made with the development of a value-for-money framework and other evaluation tools;

d)the Fund’s contribution to capacity-building in partner countries;

e)the impact of the match-funding model on the Government’s commitment to have 100% untied UK aid; and

f)the impact against development objectives of some of the Fund’s controversial grant awards.

14.We also sought evidence from one of the Newton Fund’s largest delivery partners, UKRI,14 in order to get a better understanding of the ODA-compliance system used by partners in charge of allocating the Fund’s grants. To this end, we asked UKRI:

a)what criteria it used to determine which projects were ODA-compliant;

b)how it balanced the Fund’s primary and secondary objectives when awarding grants;

c)what requirements and guidance it received from the Department to fulfil its ODA-compliance obligations; and

d)the impact against development objectives of some of the Fund’s more controversial grant awards.

15.In the following chapter, we outline the conclusions we drew from this evidence and set out the recommendations we make to the Government on BEIS’s administration of the Newton Fund.


5 Department for Business, Energy and Industrial Strategy, ‘Newton Fund: building science and innovation capacity in developing countries’, accessed 22 May 2020

6 ICAI, The Newton Fund, a performance review, para. 3.1, p. 9

8 Video-conferencing facilities were subsequently developed within Parliament for Covid-19 compliant hearings.

9 Committee of Public Accounts, One Hundred and Seventeenth Report of Session 2017–19, The effectiveness of Official Development Assistance expenditure, HC 2048

10 International Development Committee, Fifth Report of Session 2017–19, Definition and administration of ODA, HC 547

11 National Audit Office, Session 2017–19, Report by the Comptroller and Auditor General, The effectiveness of Official Development Assistance expenditure, HC 2218

14 UKRI is the amalgamation of the former seven research councils, Innovate UK and Research England.




Published: 15 June 2020