ODI on the new UK aid strategy

27 November 2015
Articles and blogs

In November the UK Treasury and Department for International Development (DFID) announced a new aid strategy. It outlines a new cross-government approach that seeks to address a range of global challenges, including but not limited to global poverty.

The narrative of the strategy firmly positions UK aid 'in the national interest' while reaffirming its commitment to spend 0.7% of gross national income on aid. It also commits the government to deliver all of the Conservative Party’s general election manifesto pledges on international development as well as a strengthening of focus on transparency and accountability.

The aid strategy was published alongside the Strategic Defence and Security Review, which outlines the UK’s wider defence and security strategy, and the Spending Review detailing how UK aid will be spent across government departments with a plan to allocate 28% of UK aid outside DFID by 2020.

It presents four new strategic objectives:

  • Strengthening global peace, security and governance;
  • Strengthening resilience and response to crisis;
  • Promoting global prosperity;
  • Tackling extreme poverty.

It also launched a number of new cross-government funds and initiatives and confirmed the Prime Minister’s previous announcement that 50% of UK aid will be allocated to fragile states.

So what does this all mean for international development?

Gideon Rabinowitz, Research Officer (Centre for Aid and Public Expenditure):

50% of aid to fragile states

At first glance this seems to signal a significant change in aid allocation, given that the commitment supersedes the 2010 commitment to allocate 30% of bilateral aid to this group of countries. It does though depend on which list of fragile states is used.

Using the OECD’s list, 77% of the UK’s bilateral aid already goes to this group of countries. However, based on the harmonised list used by the multilateral development banks this figure is currently 37%, implying significant reallocations will be required.

The implications of any reallocations will also depend on which non-fragile states lose out and which fragile states gain, as both of these groups include both low and middle income countries. These questions are likely to be answered as part of the Bilateral and Multilateral Reviews which are expected in spring 2016.

Delivering aid outside of DFID

In 2014 DFID delivered 85.8% of the UK’s aid. The government has announced this will fall to an average of 72% during 2015/16 - 2019/20, implying that by 2019/20 it could be 70% or lower.

On the basis that the UK’s overall aid will increase to £16.3 billion in 2020, this implies a near tripling of aid delivered outside DFID from £1.7 billion in 2014 to around £5 billion in 2020.

So what will constitute this non-DFID aid? We only know the bare bones of this.

Around £3 billion will consist of a number of cross-government funds (related to conflict and fragility, prosperity and health) resourced from the DFID budget and expanded funding for climate change.

However, this still leaves £2 billion of additional non-DFID aid by 2020. It therefore seems likely that some very significant new areas of non-DFID aid will emerge. This could be in areas such as support to refugees, peace-keeping and security, which will require changes to the OECD’s rules on what qualifies as aid and could fundamentally change the focus of UK aid.

Andrew Rogerson, Senior Research Associate (Centre for Aid and Public Expenditure):

The new £1 billion 'Ross Fund' for work on malaria and other infectious diseases (in partnership with the Bill & Melinda Gates Foundation)

This fund has the potential to help tackle the unacceptable blight on our humanity caused by diseases and make millions of lives better. However, there is a risk that this new fund will duplicate the work of the existing and well-established Global Fund, also supported by the UK Government and The Gates Foundation.

While the Global Fund has its shortcomings, these could be addressed as part of its upcoming 2016 replenishment. For example, its research and development work could be scaled up and its mandate could be expanded to include other diseases. It could also be permitted to focus on the complete eradication and elimination of diseases, even if that means working in richer countries.

It would be much better to work within and improve existing funds rather than supporting the proliferation of single-issue funds that are supported by small groups of countries and foundations. These might offer more control and reduce the transaction costs associated with wider partnerships in the short term, but could ultimately undermine efforts to ensure a coherent global responses that will deliver both health as well as wider interconnected development objectives.

Dirk Willem te Velde, Head of the International Economic Development Group:

Focus on global prosperity

In a modern interdependent world we should consider the global impact of national actions and the national interest of global actions. The new strategy clearly emphasises the importance of inter-linkages between economic development and the national interest.

In 2002 we argued for the importance of investing in global public goods. While this justifies the use of some aid, there is a bigger case for mobilising non-aid funds to promote global public goods because of the effectiveness in promoting the national interest. Consider investment in tackling communicable diseases at source (e.g. Ebola), or reducing CO2 emissions where it is cheapest.

Another option would be to consider investment through finance in the most credit-constrained settings. This is precisely the rationale behind institutions that channel finance from surplus areas to deficit areas. ODI argued in 2011 that development finance institutions can play a key role in tackling such global challenges so it is good to see the UK moving more in this direction.

Developing country prosperity is good for the UK national interest in many other ways. First, the knowledge that poverty is reduced in poor countries contributes to a global public good that confers utility worldwide. Secondly, returns on foreign direct investment in Africa remain higher than anywhere else in the world, benefiting both recipients and the UK. And third, Aid for Trade lowers trade costs in recipient countries, which helps them to develop, and in turn benefits UK importers and exporters, with aid paying for itself.

That said, the new UK aid strategy should be followed up by a review of interdependencies between UK core policies and global prosperity. ODI’s report on financing for development argues it is crucial to consider both finance and policies together.

Sara Pantuliano,  Director of Humanitarian Programmes (Humanitarian Policy Group):

Focus on conflict and security, including increased spending for the Syria crisis, expansion of the cross-government Conflict, Stability and Security Fund (CSSF) and creation of a new £500 million crisis reserve fund to respond to emerging crises.

The new aid strategy should be read alongside the Strategic Defence and Security Review to get a more comprehensive understanding of the UK’s approach to responding to conflicts and crises around the world.

The Review presents a coherent cross-government strategy that importantly includes strong consideration of development objectives (chapter 5) and respect for the international rules and laws that should inform the UK’s engagement in conflicts and fragile states.

Critically, the document affirms the UK’s commitment to international humanitarian law. Global events in the last year demonstrate the need for a rapid reaction facility and this should support the UK government and its partners to mobilise quickly should something such as the Ebola crisis arise again.

The nature of today’s crises means in many cases a more coherent approach in-country can benefit from different perspectives and areas of expertise that the fields of development, diplomacy and security can offer. This approach also acknowledges that problems are seldom neatly siloed so solutions therefore need to be holistic and joined-up.

A key issue is to ensure genuine cross-government collaboration that affords equal, and in some case more, weight to development objectives and respond to the need of people living in crisis situations.

However, there is a danger in some contexts of conflating security and development objectives, most particularly in conflict situations.

It is therefore important for the UK, as well as the wider international community, to deliver these new strategies and approaches within existing internationally-agreed principles and guidelines, ensuring that a humanitarian/development response is not perceived to be furthering military/security objectives.

Nilima Gulrajani,  Research Fellow (Future of Development Agencies Programme):

The overarching narrative of the new UK strategy is that foreign aid is about helping the world’s poor – and advancing national security and prosperity. This dual positioning is potentially problematic for two reasons.

First, it is unlikely to keep critics of the government’s aid ring-fence at bay. A recent poll suggested six out of 10 British citizens wanted overseas aid to be the leading target for the chancellor’s axe in the recent spending review. There is a widespread perception that aid spending comes at the cost of underinvestment in domestic public services. This may be why some of the most vulnerable in British society feel affronted by a generous aid budget.

Second, branding UK aid as an instrument that serves domestic policy dilutes nearly two decades of British effort playing guardian and steward to a robust global development agenda. The new aid narrative jeopardises this hard-won reputation but also risks under-delivering on real development results, if the experiences of Canada and Norway are anything to go by.

If the public and political pressures cannot prevent the dissolution of bilateral aid into an instrument of global realpolitik, there may be value in channelling greater amounts of aid into the multilateral system. Inter-governmental governance structures can protect aid budgets from political capture by any single state and achieve coordinated solutions to global challenges that doesn’t risk turning aid into just another tool of national statecraft.


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