Sunday, 21 July 2019

Overseas aid: in the national interest?

Britain’s high spending on foreign aid is a contentious topic. Beloved by many parliamentarians, this enthusiasm for overseas development is not mirrored amongst the public. At best the British people are divided over the subject, but polling indicates that people want less money spent on foreign aid. Although occasional polls using noticeably leading questions often give a different result, huge scepticism towards high aid spending is easily confirmed with a quick survey down at the local pub.

It is not that the British people do not want to give a hand-up to the poorer peoples of the world, nor is it that they are not generous. Quite the contrary, Britons prove year-on-year that they care greatly for impoverished nations when, at every charity appeal, ever greater amounts are donated by the public. This money goes towards providing clean water, mosquito nets, and building vital local facilities in areas where communities lack the resources to build their own.

Despite this, the legal target to spend 0.7% of Gross National Income (GNI) on Official Development Assistance (ODA) (popularly called foreign or development aid) is simply not popular. It bewilders the public that charity – from their perspective – is treated by the government as a legal requirement. That the target was created during the depths of the age of austerity only increases the ire in which it is held. The Department for International Development (DFID), has been just about the only department to see its budget almost double. At the same time, the tax burden in Britain has reached a near 50 year high, fuelling this record spending on development aid.

The hope had been that, having pledged ourselves to spending a fortune each year on development aid, fellow developed nations would follow our lead. This had in fact been agreed as far back as 2005 when at the G8 Gleneagles Summit the European attendees all agreed to raise ODA spending to 0.7% of GNI. Yet fast forward to 2013 and only Britain had honoured that pledge. It began to seem that Germany was in fact finally joining the UK in honouring the 2005 pledge when it spent 0.7% on ODA in 2016. Yet as it transpired that was just a blip on the radar thanks to high in-country refugee costs that year. Since then, it has declined. In short, the argument that Britain’s commitment would see the burden better shared with other developed nations has been comprehensively disproved.

Having then seen no other major economy follow the UK in consistently achieving the target, should London continue to pursue it? One of the target’s greatest advocates, Lord Hague, a former Foreign Secretary, admitted in 2018 to the House of Lords International Relations Committee:

It is very disappointing that the UK’s setting a strong example internationally by spending 0.7% of GDP [sic.] on development… has not produced many countries following our example. In fact, the trend is in the opposite direction. In European countries and most Western countries, the trend in the share of GDP [sic.] going to that is down.

I suspect that if we look 10 years ahead and that remains the case, it will be harder and harder to justify the British budget…

Lord Hague’s statement foreshadows a decision that the UK will have to face in the coming years. Regardless of the hysteria from the well-funded press operation of DFID and the giant NGOs that provide it with robust support, public pressure to address high aid spending is becoming insurmountable. Should Britain drop the target, or adjust its development posture to better justify the expense?

Lowering the target would be a tempting option for any government looking for more cash. For aid-sceptics it is a piggy bank to be raided for spending pledges that cannot be funded otherwise, or when tax cutters (rightly) identify a clear area of spending that can be cleanly cut to reduce the cost of government. Proponents of the target meanwhile will robustly assert that the target is integral to Britain’s role as a soft power superpower, and may fret that any retreat from the target might impact negatively on the Global Britain brand.

Increasing the popularity of ODA means understanding what purpose Britons believe it should serve….it seems clear that Britons are instinctively more minded towards aid being deployed in a manner respecting the national interest rather than based on need alone.

Unfortunately, in spite of public opinion, it is this latter group who currently hold a firm majority in parliament. As such, any government would face great difficulty in changing Britain’s aid legislation.

However, that does not mean changes cannot be made to policy. Though it is not immediately obvious from the 2015 International Development Act, the government does not actually have to spend 0.7% of GNI on ODA. All the International Development Secretary has to do is explain to parliament why the target has not been met.

Of course, such a move would likely not endear the government to parliamentarians and so routinely undercutting the target may be unwise, although the government should not be afraid to use this flexibility if appropriate circumstances permit (such as deploying humanitarian aid to a developed nation following a national disaster). The alternative to this is working to increase the relevance and popularity of ODA in relation to the British people.

Increasing the popularity of ODA means understanding what purpose Britons believe it should serve. A 2015 YouGov poll for example found that a majority of respondents felt it should be used in the pursuit of the British national interest, rather than purely based on need. This finding was backed up by a 2019 joint report by the Henry Jackson Society and British Foreign Policy Group which found that more people felt British foreign policy should be interest-driven as opposed to values-driven. So it seems clear that Britons are instinctively more minded towards aid being deployed in a manner respecting the national interest rather than based on need alone (it should be noted that in many cases these different approaches coincide).

The restrictions around how the development budget can be used in the national interest were thrust into the public eye in 2017, when three British Overseas Territories were devastated over the course of two weeks by Hurricane Irma, one of the strongest storms ever recorded. The three islands were practically flattened by the hurricane. Boris Johnson, the then Foreign Secretary, remarked on a visit shortly after that the scale of the devastation reminded him of Hiroshima, which experienced an atomic bomb strike in the final days of the Second World War.

The British response to the crisis was however hampered. Although DFID maintains a budget in order to respond to humanitarian emergencies, on this occasion the vault remained sealed. This was because the rules set by the Development Assistance Committee of the Organisation of Economic Cooperation and Development (OECD) prevented these territories from receiving ODA because by 2014 they had all graduated from the OECD aid recipients list. The UK was left with the farcical situation whereby the £14 billion aid budget could not be used to help its own overseas territories. Instead, funding for the response had to be drawn from across government. One government minister estimated this lowered the initial money available for the response by up to five times.

Nor should Britain accept that the few changes achieved to ODA rules so far is the limit to its ambition when it comes to changing them to better reflect the British interest.

In this case, British interests were subordinated to following the rules. Had money earmarked for humanitarian emergency response been used, the only repercussion was that Britain might narrowly have missed the 0.7% of GNI target, leaving the Secretary of State for International Development to explain to parliament why. Is it then any wonder that the public might want the aid budget spent increasingly in the national interest?

One road Britain could take to remedy this is to pursue reform of OECD rules. To some extent, this has already begun. In recent years the UK has been at the forefront of pushing for changes in ODA rules. In 2016 the UK secured important changes to ODA rules which increased the proportion of the costs of peacekeeping missions that count as ODA, and allowed costs of countering violent extremism to be discounted as ODA. Following Hurricane Irma in 2017, the UK then went on to secure changes which would allow countries to re-enter the ODA-eligibility list in the event of natural disasters.

But why stop there? Although it is encouraging that Hurricane Irma got the cogs turning, if that very same hurricane occurred tomorrow Britain would incur the same problem. OECD rules would still prevent ODA funds from being used immediately to respond to the ensuing humanitarian emergency, because the afflicted location would not be able to gain immediate re-entry to the OECD list of eligible nations. And the government would likely remain just as hesitant now as it was in 2017 to embrace the flexibility in the International Development Act.

Nor should Britain accept that the few changes achieved to ODA rules so far is the limit to its ambition when it comes to changing them to better reflect the British interest. Poorer countries face a wide range of problems that can stunt their development, but also threaten Britain. Cracking down on piracy and the drugs trade, for example, is of benefit to both the host countries and the UK. British shipping is frequently threatened by piracy, and drugs smuggled across the Indian Ocean often make their way onto British streets fuelling crime at home. But they also support a growing criminal culture in developing countries that is relatively low-risk but potentially very high-reward.

Similarly loan guarantees are not incentivised under the current system despite being of great benefit to developing nations. Currently the guarantee costs only count if the developing state cannot fulfil its obligations. By allotting a small proportion of a successful loan value as ODA, donors would have more reason to guarantee these loans. This mirrors a flaw in what private sector investment counts as ODA. Like loan guarantees, it only presently counts as ODA if the investment fails.

DFID is continuing to work on potential reforms to the international aid regime and deserves credit for that, and at least on the surface is doing so in a manner that ensures aid can be better used in the British interest. However, there is likely a limit to what can be achieved at the multilateral level.

If Britain hits a wall by that point, then the government will have to face the reality that the 2015 legislation is unduly restrictive, and in its current form provides little tangible benefit to the UK. If it fails to achieve the level of reform necessary to win over the public, then there is little doubt that the high levels of ODA spending will continue to be seen as an excess, and British taxpayers will become ever more embittered towards development aid.

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