Questions to Dr Barton, ICAI
Q1 Are you satisfied with the Department’s response to ICAI’s recommendations?
With the exception of their action on gender equality and on overall oversight, and a start on ensuring better value for money, we were disappointed by the government’s response. Despite accepting all of our recommendations, they do not seem to have addressed our main concerns; instead, in many cases, they point to existing practices which we had already found wanting. In essence, BEIS continues to reject the fundamental premise of ICAI’s review and the thrust of the recommendations.
In particular, we found the responses to Recommendation 1 (on primary purpose and ODA compliance), and Recommendation 3 (on untying aid) inadequate. Although BEIS has issued further requirements on reporting in relation to Official Development Assistance (ODA) eligibility (an improvement in assurance), they have not addressed the fundamental issue, which is that ODA compliance is set initially as a very low hurdle. There is no clear line of sight to poverty reduction in the guidance, nor more broadly to development impact. The lowest hurdle for eligibility, for capacity building grants, was that the research, so long as it is involving a country deemed eligible to receive ODA on the OECD-DAC list, qualified as ODA whether it addresses development challenges or not. But given the operating model, the focus is on the countries with the highest capacity already. In our view, issuing new guidance on ODA eligibility in response to Recommendation 1 is a welcome recognition that something more was needed, but an insufficient step. While there are individual projects which do undoubtedly achieve positive impact, there is still no strategy to maximise development benefit.
BEIS also seem to have overlooked the crux of our recommendation 3 on tied aid, that, although they may technically be meeting the OECD-DAC guidance on the grounds that this type of aid (they define it as standalone technical assistance) is not subject to untying rules, they are not honouring the spirit of the government’s commitment to keep 100% of aid untied. Our review has shown that the way the funding works resulted in almost 90% of the Newton Fund spend remaining in the UK with UK institutions and it is not clear to us that anything has changed to affect this materially.
It is worth noting that the DAC untying guidance is encouraging aid untying in areas not covered. The 2019 untying recommendation states (para 5):
“This Recommendation does not restrict the prerogative of DAC Members to untie ODA to a greater extent than set out herein. DAC Members are invited to continue to provide untied ODA in areas not covered by the Recommendation when they already do so, and to study the possibilities of extending untied aid in such areas.”
a. The response does not appear to contain many new commitments or actions as the Department stated it was already implementing all of ICAI’s recommendations. What further steps could the Department take to meet those recommendations?
In the first instance (and for ease of reference) we would reiterate our recommendations, which were:
The delay to the IDC evidence session as a result of the events of 2019 means we have now completed the evidence gathering stage for the first year Follow Up exercise for the Newton Fund and can use this to inform our response. (The Follow Up review is an annual publication, assessing how well the government has responded to ICAI’s recommendations in the previous publication cycle). ICAI found that BEIS had taken some steps to address ICAI’s original recommendations. In the areas of gender equality, governance and accountability (increased oversight, initial work on value for money), ODA compliance reporting procedures, and monitoring, evaluation and learning, BEIS and its delivery partners have made some important progress. We welcome this progress.
However, on the question of tied aid, we did not find evidence that the Newton Fund is reconsidering its fundamental model, beyond a limited evolution of the policy on matched funding to give somewhat greater flexibility. The Center for Global Development, Christian Aid and the ONE Campaign have all been critical of the Newton Fund’s model, which ensures that almost all UK funding goes to UK institutions. The questions raised by this practice have been acknowledged by a number of academics, as discussed at last year’s Development Studies Association conference as well as a conference convened in Cambridge on aid-funded research in February 2020. An article in Parliamentary Affairs also highlights the issue.
In its Management Response of July 2019, BEIS wrote that it “welcomes the recognition from ICAI that BEIS is compliant with the rules regarding the untying of all UK aid.” This is a misunderstanding of what our review found. On the contrary, the review flagged concerns that “almost 90% of the Newton Fund stayed in the UK and goes to UK institutions.” The review further cautioned: “BEIS should comply with both the letter and the spirit of the untying commitment.” We understand that BEIS’s claim is not that the aid is in fact untied, but that this type of aid (defined by them as standalone technical assistance) does not fall under the OECD-DAC rules on aid tying, or as they previously said in a letter on the Global Challenges Research Fund in 2017 that “it is untied by convention”. We cannot agree that the UK should ignore the negative impacts of tying aid in the research context just because of a reporting technicality.
We have on-going concerns on the questions of equitable research and innovation partnerships. We feel that BEIS is conflating equal with equitable. The overall model works reasonably well when the partnership is with advanced research nations such as China and India, and with institutions within these countries that have significant research resources and existing experience in international research partnerships. However, it disadvantages countries, states/provinces and institutions with fewer financial resources, which are not able to keep up with the Newton Fund’s matching criteria and which need stronger capacity building elements to the funding to make the most out of the partnership.
There is also limited focus on institutional capacity building (as opposed to funding to individuals, which has less impact on its own). Despite the fact that the Fund bases its lowest hurdle of ODA eligibility on its capacity building function, it is targeted primarily on the countries, institutions and individuals with high capacity already. Given that there is no substantive change to the Fund’s operating model we cannot detect any response to these concerns.
While the Newton Fund should always pursue research excellence in its funding choices, we continue to stress that research excellence is a necessary but not sufficient condition for achieving strong development impact through the Fund’s research activities.
The Fund continues only to pay attention to ODA eligibility as a hurdle which is set as low as ODA rules allow, with no requirement of a clear line of sight to poverty reduction or development impact, as set out above. A dominant consideration appears to be that there should be minimal constraints on academic freedom, rather than accepting that the nature of the funding as official development assistance requires measures to ensure that its investments maximise the potential for development impact. This is both for each project funded, and for the Fund’s investment portfolio as a whole – in order to ensure that the sum of its ODA investments becomes bigger than the parts. It could ensure much more effective use of the funds with a strategy focused on the primary purpose.
b. Based on previous reviews, do you see any parallels between the shortcomings you identified with BEIS’s management of the Newton Fund and any other Departments’ dual-purpose or ODA-funded funds?
There are parallels with two other dual-purpose funds, the BEIS-managed Global Challenges Research Fund (GCRF), and the Prosperity Fund. ICAI has found that these funds have struggled to ensure that primary purpose and secondary benefits are combined in a manner that ensures that the primary purpose remains primary. In the case of GCRF, there was also an issue with aid being primarily directed to UK institutions. Other common weaknesses include portfolio strategy, and governance and results measurement, though we did see some improvements in response to our reviews.
We conducted a rapid review (not scored) of the £1.5bn GCRF in September 2017, the sister fund to the Newton Fund. The review found that the GCRF could make a potentially important contribution to global development challenges, but it had insufficient strategic direction, an overly decentralised structure, and a mixed picture on pathways to impact. We found good efforts to promote interdisciplinary work, and a need for a more structured approach to partnering with the global South. We raised concerns about tied aid and ODA eligibility.
Significant progress has since been made by the GCRF in several areas, including to the Fund’s governance arrangements, BEIS’s delivery capacity, and the attention to development impact as the Fund’s primary purpose. Unlike the Newton Fund, the GCRF now has a strong strategic direction, backed up by structures and processes to implement this strategy – such as the creation of interdisciplinary research hubs and the appointment of Challenge Leaders. In a recent follow-up exercise, we noted that initial reviews of the GCRF’s 12 Research Hubs have been positive, with potential for significant development impact. On the issue of tied aid, however, we remain concerned about the way in which some GCRF funding is allocated through the four regional Funding Councils in England, Scotland, Northern Ireland and Wales as Quality Related block funding to UK higher education institutions using a formula that is unrelated to ODA objectives or the GCRF strategy. The allocations range from under £3,000 to over £5 million, depending on the institution’s performance in the 2014 Research Excellence Framework (REF) exercise.
We also published an unrated rapid review of the cross-government Prosperity Fund in February 2017. The Prosperity Fund programmes ‘aim to remove barriers to economic growth, and promote economic reform and development to reduce poverty in partner countries.’ Our rapid review found that there were a number of challenges: (i) combining primary purpose and secondary benefit; (ii) portfolio development and measurement; (iii) procurement issues; (iv) governance; (v) delivery capacity; (vi) results measurement; and (vii) transparency. We revisited the Prosperity Fund in our Information Note on the use of aid to enhance mutual prosperity in October 2019. We flagged a range of risks for the UK from the mutual prosperity agenda including potentially ODA eligibility, although we found that care was taken to keep to the rules so far. We noted that the risks would merit scrutiny by the IDC and other interested stakeholders. We recommended in our review of UK aid to Ghana establishing clear guidance determining the appropriate use of aid in support of mutual prosperity.
c. If so, what conclusions should we draw on Government Departments’ ability to deliver ODA-eligible spending through dual-purpose funds?
UK aid policy has stated that reducing poverty and building new markets in developing countries is in the UK interest. It is uncontroversial that there are ‘win-win’ opportunities to be found in the long term. In the short term, however, trade-offs may arise.
There appears to be a recurrent issue with funds badged as “dual-purpose”, where focus on poverty reduction, or even the economic development and welfare of developing countries, is not as strong as it could be. Sometimes, in the case of research funds, ODA eligibility is even brought into question.
ICAI’s information note on The use of UK aid to enhance mutual prosperity which focused on aid aimed at providing secondary benefits in the short term to UK business, flagged a number of potential opportunities and risks highlighted by stakeholders. These included risks to: (i) the poverty focus of the UK aid programme; (ii) the public support for UK aid; (iii) the UK’s international profile; (iv) the accountability of UK aid; (v) the coherence of UK aid; (vi) the quality of development partnerships; and (vii) the quality of UK aid. It was also noted that there was little evidence that funds like the Prosperity Fund contributed strongly to short term UK commercial interest, so there was a risk of falling between two stools.
While in the case of business, there was no evidence of tying aid so far, in the case of research, it appears that the UK is content to tie aid to UK institutions, while reporting 100% untying. It may be that the UK can claim a loophole in the letter of the OECD-DAC guidance, but it is certainly not in line with the spirit of untying aid. The potential loss of EU research funding may accelerate this tendency.
In short, while there have been improvements to funds labelled as being dual purpose in response to ICAI reviews, some significant issues remain, particularly in relation to research.
Q2 In their response, the Department said that ‘The Newton Fund was designed, and has been operated throughout its lifetime, with the promotion of economic development and poverty reduction in ODA-eligible countries firmly as its main objective.’ Is this in line with ICAI’s findings regarding the way the Department prioritised the Fund’s primary objective and delivered impact against development needs?
On the contrary, we found that the Newton Fund was originally conceived to foster strong partnerships between UK research and innovation institutions and counterparts in key middle-income countries. It was not conceived with development objectives in mind, nor was it redesigned for this purpose when it was repurposed as a 100% ODA fund in 2014.
We found no evidence that careful consideration was given to the Fund’s new primary development objectives. The original ‘soft power’ objectives, which by that point should have been made secondary, appeared still to be central to the design of the Fund. In the absence of an overarching written Fund-level strategy (for part of the review period there were also no country strategies) and without strong governance arrangements and strategic steer and management from BEIS, it is not clear how the primary objectives were meant to be achieved. Also, while ODA-funded research can yield important benefits for developing countries, as we saw with individual Newton projects, the evidence from interviews as well as documentary analysis suggested that the UK government’s spending commitment to spend 2.4% of GNI on public funding of research was a dominant driver, while development impact was secondary. We heard that the Newton Fund had been an important channel for topping up funding for UK institutions, at a time when research budgets were otherwise stagnating and likely to be reduced further in the context of leaving the EU.
Many of the critical problems that we identified in our review – including the early allocation of the majority of the funding and the high concentration going to four middle income countries, the weak approach to capacity building, and the questions over ODA eligibility, best use of ODA and tied aid – stem from BEIS’ failure to put poverty reduction and development impact at the heart of the Newton Fund.
a. The Department also stated that ‘The independent mid-term evaluation of the Newton Fund, December 2018, concluded that the Fund is on track to achieve its intended impacts.’2 At the time of the review, did ICAI witness evidence that the Fund was on track to achieve its intended impacts?
To be honest it is difficult to know what the intended impacts were, as they were not stated. The evaluator had to adopt a case study approach at the project or award level given the limited available data at the time (including no baseline data, no standardised results data, and no value for money data). So it is hard to know how such a conclusion would be justified.
ICAI’s focus was on Fund-level performance, given our broader remit to focus on aid effectiveness and value for money of UK aid spending.
It is clear from the recommendations of the mid-term evaluation that there was alignment with ICAI’s findings, including the need at the time for a formal strategy, additional emphasis on capacity building, better monitoring data and more evaluation activities, a more structured approach to enable the application of research outcomes into policymaking and commercialisation.
b. Did ICAI have time to review the ‘Impacts Accelerator Scheme’ launched by the Department in March 2019 and if so, in your opinion, how successful can it be in delivering better development outcomes for Newton Fund partner countries?
We did not review the Impact Scheme (NFIS) in our original review, as it had not started, and only heard about it in our Follow Up process. We note that it represents a small budget of £25 million (3.3% of the fund). The grants are for previous and current Newton award holders and the aim is to unlock further impact. However, we have been informed that not all partner countries may be able to participate as this depends on securing matched funding or effort. At this stage it appears late and limited in reach as a measure to increase the development outcomes of the Newton Fund, but in principle it could increase the effectiveness overall if it could succeed and be scaled up in future research.
Q3 Based on the evidence ICAI reviewed, is it too late for the Department to publish a Strategy and have any meaningful impact on the Newton Fund’s administration and outcomes?
Since 90% of the funds have already been allocated, it was indeed late to change the way the current Fund is administered. But ICAI’s recommendations are relevant for any renewal of the Newton Fund and the GCRF as well as the £1 billion ODA Ayrton Fund which has been announced.
In that light it is welcome to recognise that the Department has made some progress in administration, such as increasing oversight overall (recruiting staff to enable this), doing initial work on value for money, issuing guidance on ODA compliance over time, commissioning the development of Key Performance Indicators for its theory of change and improving Monitoring, Evaluation and Learning systems. However, the lack of a published strategy does raise concerns, and it will be important that any future aid-funded research is based on a strategy which allows accountability.
Q4 In their response, the Department said they welcomed the fact that ICAI recognised ‘that the Newton Fund is already compliant with the rules regarding the untying of all UK aid.’ Does this tally with ICAI’s findings?
This does not tally with our findings. As we have noted above, although the Fund may be technically compliant with the letter of the OECD-DAC rules on aid untying in the sense that it may not technically be covered by them, the matched funding allocation model and the fact that almost 90% of UK ODA stays with UK institutions raises serious concerns about whether it honours the spirit of the UK government’s commitment to untie all aid since 2001.
a. How confident is ICAI that the Newton Fund is untied aid?
This is a complex issue for which the OECD-DAC are the ultimate adjudicators.
We feel at the very least the Newton Fund’s funding model is not consistent with the spirit of the UK’s commitment to untie all aid. Under this model, it channels UK aid money through UK delivery partners, who then fund UK universities and institutions while partner countries use their own resources to support their own research institutions’ participation in the partnership. BEIS reports this as “standalone technical assistance”, a category which is not covered by the OECD-DAC recommendation on untying aid. The same logic seems to be applied to GCRF (see above).
 “Parliamentary Scrutiny of Aid Spending: The Case of the Global Challenges Research Fund”, A. Manji and P. Mandler, Parliamentary Affairs (2019) 72, 331–352 doi:10.1093/pa/gsy014 Advance Access Publication 8 March 2018
 The Hubs are interdisciplinary consortia of academic and other institutions grouped around specific thematic areas, including oceans, urban equity, urban disaster risk, and gender, justice and security.