January 2025

The FCDO’s Approach to Value for Money

UAMH Submission to the International Development Committee

1. United Against Malnutrition and Hunger

2. United Against Malnutrition and Hunger is a not-for-profit organisation campaigning for UK action on global malnutrition and hunger. We believe that access to good nutrition is not only a right that should be enjoyed by all around the world, but also a vital pre-requisite to achieving wider developmental goals.

3. We bring together leaders from scientific, business, finance, military, diplomatic, philanthropic, and faith backgrounds who want to see a world in which everyone has access to the nutrition they need to thrive and to contribute to prosperous and stable communities.

4. Our mission is to press for UK action on global malnutrition and hunger by mobilising cross-sector expertise and championing solutions that can end it.

5. Introduction

6. This submission focusses principally on existing approaches to assessing value for money in ODA spending, and the issues we believe the FCDO should address in producing a revised VFM framework. It also touches briefly on debt relief.

7. We make two recommendations for inclusion in a revised VFM framework relating to (a) assessment of the enhanced value for money of foundational ODA investments, which have impact beyond individual programmes or portfolios, and; b) the potential to maximise the value for money of UK ODA spend through domestic resource mobilisation and leveraging philanthropic and private capital.

8. How does the FCDO currently define the term Value for Money? Are there any other aspects of Value for Money that the FCDO should be considering in its assessment?

9. As noted in the Committee’s introduction to this inquiry, the FCDO has not published a value for money framework (VFM) since DFID was merged with the FCO in 2020.

10. Our working assumption is that value for money decisions on UK ODA spend continue to be made on the basis of DFID’s 2011 Value for Money Framework[i], as updated in the 2015 Review of ODA Spending[ii], both of which draw on HM Treasury’s established value for money principles, set out in the Green Book.

11. The Existing VFM Framework

12. DFID’s VFM approach was based on a 3E framework which prioritised:

• Economy: Are we buying inputs of the appropriate quality at the right price
• Efficiency: How well are we converting inputs into outputs? (‘Spending Well), and
• Effectiveness: How well are outputs from an intervention achieving the intended effect? (‘Spending wisely’).

13. As the Independent Committee on Aid Impact (ICAI’s) 2018 review of DFID’s approach to Value for Money[iii] noted, the ‘3E’ approach, cited in the 2011 VFM Framework has been increasingly supplemented by a 4th E:

• Equity: How fairly are the benefits distributed? To what extent will we reach marginalised groups? (‘Spending fairly’).

14. The framework also includes a cross cutting focus on ‘Cost effectiveness: What is the intervention’s ultimate impact on poverty reduction, relative to the inputs that we invest in it?’

15. The 2018 ICAI Review had many positive reflections on DFID’s approach, finding that: ‘value for money has been thoroughly integrated into DFID’s programme management.’  However, it also raised concerns that: ‘DFID’s results system is not currently oriented towards measuring or reporting on long-term transformative change – that is, the contribution of UK aid to catalysing wider development processes…’ and recommended that: ‘DFID’s value for money approach should focus not just on the achievements of each individual programme, but on how they work together to deliver lasting impact.’[iv]

16. Recognising Enhanced Value for Money Impacts

17. The current VFM framework appears to have been applied effectively to individual programme management, but as indicated above, it is less clear how the framework addresses cross programme and portfolio impacts, and how it has been applied in determining DFID’s – and subsequently – FCDO’s portfolio and strategic priorities.

18. Investment in particular portfolio areas have the effect of increasing the impact of programmes in other portfolios, and as such represent enhanced value for money. Nutrition is a good example of this, as DFID’s 2009 report – ‘The neglected crisis of undernutrition: Evidence for action’ – makes clear:

19. ‘Nutrition is, essentially, a foundation for the attainment of the MDGs. Improved nutrition will significantly reduce child and maternal mortality, improve educational outcomes, and increase productivity and growth. Prevention of malnutrition is therefore a long-term investment, which greatly benefits both present and successive generations and preserves human capital.’

20. The multiplier effect of nutrition investments was further highlighted in DFID’s 2017 Global Nutrition Position Paper[v], which stated:

21. ‘DFID investments in nutrition will support the delivery of the primary objectives of the UK aid strategy:

• strengthening global peace, security and governance: hunger and malnutrition can be both a cause and a consequence of conflict. Ensuring people are properly nourished and healthy is fundamental to well-being and has a lasting impact on whole societies;
• strengthening resilience and response to crises: malnutrition places tremendous costs on individuals, families and entire nations; preventing malnutrition gives children a strong start in life and puts them and their families in a much better position to reduce their vulnerability to shocks. Developing prevention, resilience and response services that build in improvements in nutrition will save lives and also ensure future generations can thrive;
• promoting global prosperity: preventing malnutrition increases productivity and economic growth. Children whose growth is stunted due to poor diet and ill health do less well at school, earn less as adults and go on to have malnourished families of their own. It is estimated that a 40% reduction in stunting by 2025 could add $83 billion to national incomes in Africa over the period 2035 through to 2060;
• tackling extreme poverty and helping the world’s most vulnerable: preventing malnutrition is one of the most cost-effective ways of spending UK aid. It helps people escape extreme poverty, boosts economic growth and reduces the need for aid in the long-term. Economists estimate that every dollar invested to reduce stunting delivers a return of sixteen times as much in increased economic productivity and reduced burden on public services.’[vi]

22. As indicated above, addressing nutrition enhances the impact of other interventions. A well-nourished child is 11 times less likely to die from common infectious diseases, such as pneumonia, than a severely undernourished one.  Good nutrition reduces the risk of obesity, cancer, and other noncommunicable diseases such as diabetes and cardiovascular disease, which are on the rise in many low- and middle-income countries (LMICs). It also makes vaccines more effective, reducing the risk of infectious diseases.

23. Given the current constraints on ODA funding, investing in foundational portfolios, such as nutrition, which can enhance the impact of other programme areas, represents best value and should be reflected in the FCDO’s VFM approach.

24. RECOMMENDATION: We recommend that a revised FCDO VFM framework should explicitly recognise the value for money benefits of investment in foundational areas such as nutrition, given their multiplier impacts across development objectives, which go well beyond the VFM of a specific programme intervention.

25. Maximising value for money by mobilising domestic resources and leveraging philanthropic and private sector capital

26. Neither DFID’s 2011 Value for Money Framework nor the Value for Money chapter of the 2015 Aid Strategy, address the potential to enhance the value for money of ODA spending by investing through mechanisms capable of mobilising domestic resources and leveraging philanthropic and private sector capital.

27. Mechanisms such as the Child Nutrition Fund (CNF) developed by UNICEF with support from the UK Government, the Bill & Melinda Gates Foundation, and the Children’s Investment Fund Foundation (CIFF), have huge potential not only to maximise value but also to create genuine partnerships with LMICs and a path away from dependency.

28. Critically, the CNF provides a means to unlock financial and political commitment from LMICs, creating a path of transition from global to domestic financing, and an exit strategy for global donors. Match funding from domestic resources and philanthropic pledges have the potential to multiply UK Aid contributions by as much as sixfold. At a time of increasing public scepticism of ODA, such approaches represent excellent value for money and are more likely to sustain political and public support.

29. RECOMMENDATION: We recommend that the value for money potential of multiplying ODA spending through mechanisms such as the CNF, that mobilise domestic resources and are matched by philanthropic or private capital, is explicitly recognised in a future FCDO VFM framework.

30. How effectively are the FCDO utilising financial instruments, including: Debt relief; Guarantees; and Special Drawing Rights?

31. Unsustainable debt servicing levels are severely constraining the ability of LMIC governments to address developmental challenges. A recent report[vii] by the UN’s Tade and Development arm, UNCTAD found that:

‘A total of 3.3 billion people live in countries that spend more on interest payments than on either education or health This situation is untenable and must change’[viii]

32. United Against Malnutrition and Hunger has commissioned research into the links between high levels of debt distress and impacts on malnutrition and hunger which should be available in late February 2024 and which we would be happy to share with the Committee.

33. It is clear that current levels of debt servicing undermine the development potential of LMICs and thereby compromise the impact and value for money of aid spending. To be effective, action to tackle the debt crisis that is enveloping LMICs needs to be progressed on an international basis. However, the UK should take a lead in developing and coordinating action on debt relief, as it has in the past, and in ensuring that private sector creditors, who hold an increasingly large proportion of LMIC debt, are drawn into the process. This is particularly important as the majority of bond contracts are governed by English law.

34. Conclusion

35. The assessment of value for money in a development context is a complex one, as long-term impacts are harder to measure than short-term outcomes. Consequently, VFM is often seen through too narrow a lens.

36. As set out in our two recommendations, we urge the FCDO to incorporate a greater focus on the overall transformative impact of foundational portfolios, such as nutrition, into its VFM approach, as well as taking account of the capacity of investments to mobilise domestic resources and philanthropic and private capital.

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