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Government ‘dragging its feet’ and needs to address serious value for money concerns of its £735m Newton Fund

15 June 2020

The first Report from the Sub-Committee on the work of the Independent Commission for Aid Impact (ICAI) is published today following its inquiry into ICAI’s review of the Newton Fund.

ICAI’s review of the Newton Fund

Despite the Government accepting a number of recommendations from the ICAI’s review in 2019, transparency, demonstrating value for money, tied aid, and addressing governance issues all remain key areas of concern.
 
The Newton Fund has a total budget of £735 million of Official Development Assistance (ODA) funding for 2014-2021 and is administered by the Department for Business, Energy and Industrial Strategy (BEIS). The Fund looks to develop science and innovation partnerships to reduce poverty, and to boost the UK’s wider prosperity and global influence by building ties with partner countries.
 
However, significant concerns were raised last year by ICAI that some of the programmes the Newton Fund supports fail to properly demonstrate an impact against development objectives, with little oversight from the Department and poverty reduction is treated as an after-thought. The Sub-Committee agrees with ICAI that the Fund should be redesigned to have development impact at its core, with tangible value-for-money and compliance with ODA objectives being shown. It also expects BEIS to finish implementing changes it committed to almost a year ago and to start demonstrating that it is holding delivery partners accountable on the programmes they deem eligible for considerable amounts of UK aid. Only then, the Sub-Committee believes, should any extension, or increase in funding, for the Newton Fund be agreed.

Chair's comments

ICAI Sub-Committee Chair, Theo Clarke MP, said:

“All UK official development assistance should seek to achieve one thing above all: poverty reduction.
 
“It is commendable that the Newton Fund seeks to utilise the UK’s world leading science and research expertise to make real lasting change for impoverished communities, but it must be showing real impact and demonstrate value for money for the taxpayer. Despite ICAI’s calls for the Government to reform the governance and design of the Fund in these areas, it is yet to be fully seen.
 
“It is particularly concerning that some evidence suggests that the Newton Fund does not wholly abide by the spirit of the Government’s own commitment on tied aid. It is imperative that, before any more funding is potentially given to the Fund, value for money and governance concerns are dealt with.”

The concept of tied aid - aid that is subject to the condition that it be spent on goods or services from the donor country - remains a concern of the Sub-Committee with the Newton Fund. Despite the Government’s assertions that the UK does not have tied aid, the Sub-Committee heard that there is significant evidence that the Newton Fund does not abide by the spirit of the Government’s commitment on untying all UK aid. The Government should therefore undertake a thorough review of the extent to which the matched funding model, which is used for the Newton Fund, is compatible with the spirit of the Government's commitment to untie all UK aid.

The full list of the Sub-Committee’s recommendations to Government are:

  1. The Newton Fund should not be extended at the next Spending Review if BEIS is not able to demonstrate by then that it can measure value-for-money and impact. In addition, from inception, such a fund should have both a strategy and a theory of change. Renewal of the Fund should also be conditional on the Department improving the way it collates data to measure impact, starting with meeting its own deadline of October 2020 for the rollout of its 'Research ODA' information management system.
  2. HM Treasury and DFID take the lead in promoting and monitoring excellence in ODA administration across Whitehall. In addition, the Fund should only continue to be financed with ODA if the Department uses DFID's expertise to substantially reshape it towards a model that prioritises its primary purpose and delivers development impact to a high standard
  3. We recommend that the Government undertake a formal review of the extent to which the matched funding model which is used for the Newton Fund (and other funds like the GCRF) is compatible with the spirit of the Government's commitment to untie all UK aid and the letter of the rules on ODA as articulated by the Development Assistance Committee (DAC) of the OECD. This review should also specifically outline how the Government intends to de facto as well as de jure untie UK standalone technical assistance and proposals to strengthen the OECD-DAC rules to this effect. The outcome of this review should be reported to our parent committee (the International Development Committee).
  4. BEIS needs to take a bigger role in coordinating and monitoring delivery partners' ODA eligibility processes and go much further in implementing ICAI's Recommendation 1, starting by publishing as soon as possible its much-delayed revised ODA compliance guidance for delivery partners and country reviews.
  5. DFID's approach to performance evaluation should be replicated by other departments like BEIS which are administering increasingly large amounts of ODA and must therefore demonstrate, prior to being given this responsibility, their ability to measure impact.
  6. If it is to be renewed at the next Spending Review and continues to be entirely ODA-funded, the Fund's grant allocation system should be radically redesigned to ensure that developmental impact becomes its genuine driving force (and not just a constraint around its secondary purpose). BEIS needs to impose stronger ODA-eligibility criteria and encourage delivery partners to switch from allocation processes designed solely for research excellence projects to ones that prioritise development impact. Fellowship awards should not be used to support research on any topic, whether related to development or not, if they are to be funded using ODA.
  7. BEIS should follow DFID's example and publish on a single platform all relevant information on a) delivery partners' ODA-compliance processes, b) the ODA compliance guidance it is currently developing for delivery partners and how it will enforce it, c) details and statistics of Newton Fund grant applications that are accepted or rejected depending on ODA eligibility, d) business cases, performance and transaction data and reports (e.g. programme completion and annual reports) for all ODA projects it is responsible for.

Notes to Editors

  1. The Sub-committee scrutinised the Independent Commission for Aid Impact’s (ICAI’s) 2019 review of the Newton Fund and conducted exchanges of written Q&A with key stakeholders.
  2. The role of the Sub-Committee is to take forward work on reviews submitted to the International Development Committee (IDC) by the Independent Commission for Aid Impact (ICAI). The Sub-Committee reports via the IDC from which it derives its membership.
  3. ICAI published its review of the Newton Fund in June 2019.
  4. ICAI’s six recommendations to BEIS, the responsible Government department, were: 

1. 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.
2. The Newton Fund should ensure it meaningfully considers options for reducing gender inequality and reports against its progress.
3. 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.
4. 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.
5. BEIS should improve the Newton Fund’s approach to and measurement of value for money.
6. The Newton Fund should improve its approach to monitoring, evaluation and learning at the Fund level.”

The Government responded to ICAI’s review in July 2019.

Further information

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