Disclaimer: I am Dr. Jie Sheng Li, a freelance research analyst in Singapore with degrees in international political economy and development studies. This written submission is written by myself and not representative of an organisation.

 

Why the UK gives foreign aid?

 

Th UK provides foreign aid, officially known as Official Development Assistance (ODA) for a variety of reasons. These include (1) gaining economic benefits; (2) strategic and national interests; (3) moral and ethical reasons, and (4) to improve a recipient’s overall economic development.[1]

 

3) The UK provides aid for moral and ethical reasons due to its colonial and political past.

The UK was a colonial power and provided development assistance to its colonies and former colonies after World War Two. The 1957 White Paper affirmed a close link between the UK and its colonies and former colonies.[2] Other White Papers such as 1965 White Paper, the 1967 White Paper and the 1975 White Paper all emphasised the UK’s role to improve developing countries.[3][4][5] This was also affirmed by the Labour government under previous Prime Minister Tony Blair.[6]

 

4) Following suit, the UK continues to provide foreign aid to reduce poverty and improve the economic development of developing countries. The above White Papers not only affirmed the UK’s moral reasons for providing aid but also that aid could improve recipients’ economies, thus reducing global inequality.[7] The 1997 White Paper prominently focused British aid to improve economic growth, reduce inequality and improve human development.[8] Subsequent White Papers noted the need to address the challenge developing countries face with globalisation, the need to improve development as a global common good.[9][10][11] As noted above, the former Labour government was a strong proponent of providing British aid for reducing global poverty and this continued into at the next coalition and Conservative governments under former Prime Minister David Cameron.[12][13]

 

2) Following suit, the UK provides aid for its national and strategic interests. National interests can be viewed as for moral interests and for national security interests. The pre-DFID White Papers above indicated how UK aid for developing countries was for the nation’s interests. The forewords in the subsequent White Papers under DFID all indicate how British aid for development works in favour of UK’s national interests. For example, former Secretary of State for International Development Clare Short stated that “It is our duty to care [for] those less well off than ourselves…” while another former Secretary of State Douglas Alexander stated “We must together overcome [the interconnected challenge of development].”[14][15]

 

British aid has inevitably been for the country’s national security interests’ due global conflicts and instability. In her memoirs, Clare Short recounted how DFID provided aid to post-conflict zones like Sierra Leone and East Timor and prepared for reconstruction after the 2003 Iraq War.[16] The Conflict Pool, previously known as the Post-Conflict Reconstruction Unit was formed to tackle conflicts and stability.[17] The Conflict Pool was reformed as the Conflict, Stability and Security Fund (CSSF) in 2015 directed by the National Security Council.[18] British aid for national security could be argued as ensuring human security, however it could indicate a de-prioritising of aid for development and a slight violation of the 2002 International Act.[19]

 

1) The UK used to disburse aid for its own economic benefits until 2002. Under the Ministry for Overseas Development (ODM) and the Overseas Development Administration, British aid was provided on condition that it would benefits British exports and industries or what is termed as ‘tied aid’. The most prominent of these tied aid policies was the Aid and Trade Provision (ATP), allowing British companies to gain aid-related export credit and compete favourable with the companies from other aid donors.[20] While tied British aid and the ATP may have some positive on development, the Pergau Dam affair indicated the how tied British aid was abused. In this case, UK aid was used not for to improve development but rather fund the sale of military jets to Malaysia.[21] British tied aid was stopped with enactment of the International Development Act 2002. This Act affirmed that British aid would only be provided for “furthering sustainable development in one or more countries outside the United Kingdom” and “improving the welfare of the population of one or more such countries.”[22] Although UK aid since then has been untied from commercial interests, there may be instances where UK aid has been linked to British firms. This will be detailed below.

 

 

What the benefits are to countries such as the UK of having an aid budget?

 

The UK has benefited with an aid budget by meeting global targets. It has not only an aid budget along with a Cabinet-level department from 1997 until 2020 projecting development policies. The Organisation for Economic Cooperation and Development (OECD) has always presented a favourable view of UK aid and development policy in its Peer Reviews. The 1997 Peer Review praised the creation of DFID and the government’s total dedication towards global poverty reduction.[23] The 2010 Peer Review stated that the UK was a leader in international development especially committing to the 0.7% aid target.[24]

 

The UK may have untied its aid, however, there may be scenarios where UK aid is linked to British exports. DFID has engaged in ‘Aid for Trade’ initiative, where donors would provide aid to improve the trade capacity of recipient countries. While this might improve recipient’s economy, it might link it directly to businesses from the donor nation.[25] There are papers and news reports that note how Aid for trade can be linked to donors’ exports and warn the UK not to return to tied aid.[26][27][28] More recently, the UK has launched the Prosperity Fund to improve recipient economic growth and meet the Sustainable Development Goals.[29] This fund, however, has been criticised as it is draws the UK back toward tied aid.[30][31][32] The UK may also benefit through the Newton Fund, a research fund building partnerships with middle-income countries. It has been criticised as a return to tied aid although the government has refuted this.[33][34] Another fund that the UK may benefit from, especially higher education intuitions, is the Global Challenges Research Fund (GCRF) improving research for developing countries. The GCRF has also been criticised for providing tied aid although the government again countered that this is not the case.[35][36]

 

 

 

 

Some of the problems and challenges that the aid sector faces

 

The UK aid sector faces the following challenges. 1) The fixation of aid and the 0.7% per Gros National Income (GNI) target. As noted above, the provision of aid was still supported by the Conservative Party after it gained control of parliament. MPs from all sides mostly supported the International Development (Official Development Assistance Target) Act 2015.[37] MPs from both sides voiced their disagreements when the current government reduce the aid budget temporarily from 0.7 per GNI to 0.5 per of GNI.[38] It is fine to support aid and a global target, however, there should not be a fixation on aid or an arbitrary target. The 0.7% was a non-binding agreement by the United Nations in 1970.[39] The developing world has definitely changed since 1970 and the 0.7% is more of a political target and less about improving development. Experts and think tanks have empirically showed how 0.7% of aid has continued to have less relevance for development policy.[40][41][42] Aid can improve health, provide sanitation and water, however those are short-term development outcomes and not what development is. Development is about structural progression, for example countries in East Asia utilised industrial policy, less so foreign aid, to develop their economies.[43][44] DFID’s name and research was about ‘international development’ and its ‘successor’, the Foreign, Commonwealth and Development Department (FCDO) retain the term ‘development.’. The UK, government and wider society, should focus more on development rather than a fixation on aid or arbitrary targets.[45]

 

2) A second challenge for the aid sector is the proliferation of aid channels. Aid traditionally has been disbursed through bilateral and multilateral channels and the UK conducted reviews in 2011[46][47], 2013[48][49] and 2016[50][51] for its respective channels. Nevertheless, there are other channels which donor nations utilised, particularly non-core aid or multi-bi aid.[52] This form of aid is bilateral aid channelled through a multilateral to ensure certain development themes can be met. Non-core aid is often provided when the donor a) is unable to initiate an aid project in a country or b) to increase the impact of aid for British taxpayers. Non- core aid may have its advantages for donors, multilateral organisations and recipients. However, it may reduce the amount of core funding to multilateral organisations and influence the aid policies of various multilateral organisations such as the UN agencies. The disbursement of non-core aid may also lead to aid fragmentation where there are numerous and similar aid projects in country.[53] The various Statistics on International Development indicate that the UK has provided a portion of its aid via non-core channels.[54] It is worth investigating the impact of UK non-core aid.

 

3) A third challenge for the UK are competing organisations and donors. As noted, is an OECD donor and thus provides aid alongside its OECD counterparts who provide aid for a variety reasons besides improving development. There are non-governmental organisation (NGOs), philanthropists and recently new, non- traditional donors, like India and China.[55] China has provided large volumes of ODA and non-ODA globally, quite definitely surpassing donors like the UK. China has provided education-centred assistance[56] and is focused on improve infrastructure through its Belt Road Initiative (BRI)[57] and the Asian Infrastructure Investment Bank (AIIB).[58]

 

4) Fourth, there are also Other Officials Flows (OOFs) or “official sector transactions that do not meet [ODA] criteria.” Examples include export credits extended directly to an aid recipient and subsidies (grants) to the private sector to soften its credits. OECD donors and non-OECD donors have large amounts of OOFs and this might either complement, displace traditional aid or cause aid fragmentation.[59]

 

How aid delivery can be improved

 

Aid delivery, in the case of the UK, should be improve by:

 

  1. Constantly updating why the UK provides ODA. As stated above, the Labour government was focused on poverty reduction and shifted it towards improving stability as regional conflicts arose. The last main strategy was published in 2015 and the government and global community has obvious changed. The Integrated Review will shortly be published alongside a Defence Command Paper.[60] There should be a development, not just aid paper released to indicate what is the role of the UK in global development and what role aid and other tools can be used to achieve goals.

 

  1. Aid delivery can be improved by addressing the challenges noted above. The government or international development committee should investigate the impact of UK non-core aid. It should consider if it wishes to compete or align its aid activities with new donors, not just China, or use aid as a means for great power competition. The UK should also note the impact of its and other donors’ OOFs and state how it will disburse alongside UK ODA.

 

  1. UK aid delivery can be improved by understanding what aid is and focus the priority on structural development, not just improving short-term development. The UK as a whole must understand that aid targets are arbitrary and at best create short-term outcomes. If the UK wishes to maintain aid volumes and targets, delivery at each stage must have a development focus. It understood that UK ambassadors now have final decisions over UK aid projects.[61] Although that cannot be reverted, FCDO should have development experts to advise ambassadors and ministers regarding decisions over aid projects.

 

 

 

 


[1] See Li, J. S., 2016.The Political Economy of Foreign Aid Flows’, Birmingham: University of Birmingham, unpublished thesis, p.29

[2] Ireton, B., 2013, Britain’s International Development Policies: A History of DFID and Overseas Aid, Basingstoke: Palgrave, p.21, 48, 50

[3] Ministry of Overseas Development, 1965, Overseas Development: The Work of the New Ministry, Cmnd 2736. London: The Stationery Office

[4] Ministry of Overseas Development, 1967, Overseas Development: The Work in Hand, Cmnd 3180, London: The Stationery Office

[5] Ministry of Overseas Development, 1975, Overseas Development: The Changing Emphasis in British Aid Policies More Help for the Poorest, Cmnd 6270, London: The Stationery Office

[6] Ridddell, R. C., 2007, Does Foreign Aid Really Work? New York: Oxford University Press, p.140

[7] See Also, Riddell, 2007, ibid, p, 97

[8] Department for International Development (DFID), 1997, Eliminating World Poverty: A Challenge for the 21st Century, Cm 2789, London: Department for International Development

[9] DFID, 2000, Eliminating World Poverty: Making Globalisation Work for the Poor, Cm 5006, London: Department for International Development

[10] DFID, 2006, Eliminating World Poverty: Making Governance work for the poor, Cm 6876, London: Department for International Development

[11] DFID, 2009, Eliminating World Poverty: Building Our Common Future, Cm 7656, London: Department for International Development

[12] See Short, C., 2004, An Honourable Deception? New Labour, Iraq, and the misuse of power, London: Simon & Schuster Pte Ltd, pp. 51-52, 77-91

[13] Blair, T., 2010, My Journey: A Political Life, Random House Group Ltd, p.841

[14] DFID, 1997, ibid, p.5

[15] DFID, 2009l ibid, p.6

[16] Short, 2004. Ibid, Chapters 2, 4

[17]See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/784001/The_UK_Government_s_Approach_to_Stabilisation_A_guide_for_policy_makers_and_practitioners.pdf p.8

[18] https://www.gov.uk/government/organisations/conflict-stability-and-security-fund/about

[19] For more about human security, see http://hdr.undp.org/sites/default/files/reports/255/hdr_1994_en_complete_nostats.pdf 

[20] Ireton, 2013, pp.191-203

[21]For more about the Pergau Dam and its relationship Ireton, 2013, ibid, pp. 203-209 and Barder, O., Reforming Development Assistance: Lessons from the UK Experience, Working Paper 70, Appendix1, Washington DC: Center for Global Development https://www.cgdev.org/sites/default/files/4371_file_WP_70.pdf

[22] See https://www.legislation.gov.uk/ukpga/2002/1/section/1/enacted

[23] OECD, 1997, Development Co-operation Review Series: United Kingdom, No. 25, Paris: Organisation for Economic Cooperation and Development, p.7

[24] OECD, 2010, The United Kingdom Development Assistance Committee (DAC) Peer Review, Paris: Organisation for Economic Cooperation and Development, p.13 The UK eventually met the 0.7% target in 2013.

[25] https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/7793.pdf p.ix

[26] https://www.bond.org.uk/news/2016/08/post-brexit-aid-policy-what-is-aid-for-trade-and-what-is-it-not

[27] https://www.wto.org/english/res_e/booksp_e/aid4trade13_chap1_e.pdf p.52

[28] https://www.adb.org/sites/default/files/publication/229981/adbi-wp670.pdf p.11

[29] https://www.gov.uk/government/publications/cross-government-prosperity-fund-programme/cross-government-prosperity-fund-update and https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/478834/ODA_strategy_final_web_0905.pdf

[30] https://icai.independent.gov.uk/wp-content/uploads/ICAI-information-note-on-mutual-prosperity.pdf

[31] https://publications.parliament.uk/pa/cm201719/cmselect/cmintdev/547/54707.htm#_idTextAnchor027 see paragraph 93 and 95

[32] https://www.odi.org/sites/odi.org.uk/files/resource-documents/the_new_development_v5.pdf indicated in pp18-19

[33] https://icai.independent.gov.uk/wp-content/uploads/The-Newton-Fund.pdf p.26

[34] https://www.gov.uk/government/publications/icai-review-of-the-newton-fund-government-response/icai-review-of-the-newton-fund-government-response

[35] https://icai.independent.gov.uk/wp-content/uploads/ICAI-GCRF-Review.pdf paragraphs 3.35, 3.36, 3.37

[36]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/655966/HMG_Response_to_ICAI_Rapid_Review_of_GCRF.pdf and  https://icai.independent.gov.uk/wp-content/uploads/Further-gov-response-to-GCRF.pdf

[37] See the various stages of reading https://bills.parliament.u k/bills/1413/stages

[38] https://hansard.parliament.uk/Commons/2020-11-26/debates/A2442925-0DA2-4262-B564-1C6FEE24881A/OfficialDevelopmentAssistance

[39] http://www.eytv4scf.net/a25r2626.htm

[40] https://www.cgdev.org/sites/default/files/3822_file_WP68.pdf

[41] https://philvernon.net/2012/07/13/squaring-the-circle-is-it-time-to-stop-this-0-7-nonsense/ and https://philvernon.net/2016/05/26/its-right-to-question-aid-but-better-to-focus-on-effectiveness-rather-than-the-0-7/

[42] See also https://ipeanddevelopment.wordpress.com/2011/02/27/0-7-0-07-7-the-lure-and-wonder-over-how-much-aid-countries-should-give/

[43] Chang, H-J, 2006, The East Asian Development Experience: The Miracle, the crisis and the future, London and New York: Zed Books, Chapter 1

[44] See also https://philvernon.net/2017/02/25/what-does-development-actually-mean/

[45] Ha-Joon Chang argued than the focus of aid rather than structural development is “development without development.” Chang, H-J. 2011, Hamlet without the Prince of Denmark: how development

has disappeared from today’s “development” discourse in S. Khan & J. Christiansen (eds.),

Towards New Developmentalism: Market as Means rather than Master, Abingdon: Routledge, pp.47-58

[46] DFID Bilateral Aid Review 2011 https://www.gov.uk/government/publications/bilateral-aid-review-technical-report

[47]DFID Multilateral Aid Review 2011 https://www.gov.uk/government/publications/multilateral-aid-review

[48] DFID Multilateral Aid Review assessments and responses 2013 https://www.gov.uk/government/collections/multilateral-aid-review

[49] DFID Multilateral Aid Review Update 2013 https://www.gov.uk/government/publications/multilateral-aid-review-update-2013

[50] DFID Bilateral Aid Review 2016 https://www.gov.uk/government/publications/rising-to-the-challenge-of-ending-poverty-the-bilateral-development-review-2016

[51] DFID Multilateral Aid Review 2016 https://www.gov.uk/government/publications/raising-the-standard-the-multilateral-development-review-2016

[52] See http://documents1.worldbank.org/curated/en/745221468313781790/pdf/387500idasecm200710103core.pdf

[53] See various OECD Multilateral Aid Reports such as OECD, 2011, 2011 DAC Report on Multilateral Aid, Paris: Organisation for Economic Cooperation and Development, Table 2.1. See also OECD, 2013, Multilateral Aid Report 2013, Paris: Organisation for Economic Cooperation and Development, Chapter 2

[54] https://www.gov.uk/government/collections/statistics-on-international-development

[55] https://asiafoundation.org/resources/pdfs/ChangingAidLandscapeinEastAsia.pdf

[56] https://unesdoc.unesco.org/ark:/48223/pf0000232475?posInSet=1&queryId=eb161267-c7cb-4567-bf8a-1cae2b7ddd1b

[57] https://eng.yidaiyilu.gov.cn/

[58] https://www.aiib.org/en/index.html

[59] https://www.oecd-ilibrary.org/docserver/dcr-2014-8-en.pdf?expires=1615550446&id=id&accname=guest&checksum=55DD3FE5A9C01311018E50EE5280A44B

[60] https://www.gov.uk/government/news/chief-of-the-defence-staff-general-sir-nick-carter-extended-in-post

[61] https://www.theguardian.com/politics/2020/mar/05/johnson-aims-to-integrate-foreign-office-and-dfid-operations