Stephen Crabb MP: Should the Tories abandon the UK's overseas aid target?

In the wake of the financial crisis Stephen Crabb MP asks if we should now abandon the UK’s ambitious overseas aid target.  Stephen is a member of the House of Commons International Development Select Committee and chairs the Conservative Party Human Rights Commission.

The public finances were already constrained even before the onslaught of the banking crisis and the vast new liabilities being heaped onto the taxpayer. Long before the economic chill set in, the spending taps were being turned down all across Whitehall.

Everywhere, that is, except at the Department for International Development.

The commitment made by the Government in 2005, and supported by all parties, to increase overseas aid spending to 0.7% of Gross National Income by 2013 means that DFID will continue receiving bumper increases in its funding for the next three years. In fact DFID is receiving the sharpest and fastest increase in budget of any governmental overseas development agency.

The full consequences of the bank bail-out will take time to be properly understood but long-term tax increases and spending cuts may be inevitable to restore fiscal stability and avert future inflation. Many policy assumptions are understandably being questioned in the current climate and it is right that every single area of public spending should be scrutinised for the savings that will be necessary in future.

DFID currently has more money than it sensibly knows what to do with and its Ministers are in the enviable position of being able to publicise new funding for poor countries and development initiatives on a near-fortnightly basis.

While the clarion call for “more and better aid” may have gained traction in recent years as a result of Make Poverty History, greater emphasis should have been placed on the ‘better’ rather than the ‘more’. The 0.7% target actually helps perpetuate one of the key problems within DFID and some sections of the aid lobby which is their obsessive focus on inputs rather than outcomes.

But, that said, the 0.7% commitment is not one that we can or should walk away from – even as the full scale of our wrecked public finances becomes apparent in the months and years ahead.

Firstly, no-one should be in any doubt that the current turmoil is not just a crisis for the developed world. Numerous emerging market economies will be hit very hard from a sharp fall in foreign investment. This comes on top of excruciating increases in energy and food costs recently which have undone years of progress in raising living standards in many developing countries.

The world’s poorest people need the compassion and commitment of the developed nations like never before.

Furthermore, the political cost of reneging on the deal would be substantial. The 0.7% commitment was made in the full glare of the international spotlight at a time when the world was waking up to the reality of just how far the world’s poorest people now lag behind those in the developed world.

Any UK government that decides the target is too problematic will attract the opprobrium of NGOs, churches, foreign governments and, much more importantly, the legions of British people from all walks of life who remain passionate about global poverty. While some of the energetic enthusiasm of the Make Poverty History campaigners may have dissipated in the last three years, the fact is that public support for helping the world’s poor remains strong.

In any case, we will need to expend significant political capital on other challenges in order to improve the performance of DFID and to realign some of our aid priorities. A major scrap over a broken pledge on funding is one we would do well to avoid.

The key challenge will be to demonstrate that we kept our promise on overseas aid but in a way that guarantees the aid is delivered and accounted for much more effectively than is the case under this current government.

We will need to show real determination to move to a clear outcomes-based agenda.  The British taxpayer has a right to know just what their money is purchasing in terms of real measurable improvements in the lives of the poorest people.

Although DFID Ministers claim that they lift three million people out of poverty every year, in reality little is known about what our aid is achieving. Real accountability and oversight of our aid money is actually quite weak.

Nearly half of all our aid now goes through large multilateral institutions making it difficult to track and evaluate. The big winner here is the European Union which now receives an enormous £1 billion from the DFID budget each year.

Ministers have also recently doubled our contribution (£400 million) to the troubled African Development Bank even though reforms which might just lead to it spending some money on worthwhile projects are progressing at a painfully slow pace.

When it comes to bilateral aid, there is a major challenge awaiting us in tidying up the list of countries receiving UK aid.

Andrew Mitchell was right to declare an end to aid to China under a Conservative government. Our annual £40 million of aid to China has made not a jot of difference to the growth-driven decline in Chinese poverty. If the Chinese government really does value UK technical assistance on development issues, then the world’s largest holder of foreign reserves can purchase that expertise at market rates.

India, where 400 million people live on less than a dollar a day, is by far the largest recipient of UK bilateral aid. There are increasing calls for our aid programme there also to be wound up. I do not agree. Even as it reaches ‘middle income’ status, India will still be home to the world’s largest concentration of poor people. But our aid to India certainly does need to be re-vamped to provide assistance where it is really needed.

India is set on a course of steadily increasing prosperity and living standards. That trajectory may, however, be a volatile one and there are significant risks from social unrest and inter-communal violence. So our aid should be focused on helping the Indian federal and state governments minimise these risks. Assistance in the areas of governance, anti-corruption and judicial effectiveness may be of far more benefit there than any grand poverty reduction strategy.

The same applies to a number of other major recipients of UK aid where export-led growth holds the key to reducing poverty. In some countries the focus may well need to be shifted far more towards conflict prevention, peace-building and reconstruction.

Aid is not the only part of the picture of course – or even the most important part. But there can be no soft-pedalling on our promise to achieve a step change in the quantity and quality of the aid we give.

Last year the UK technically went backwards in terms of meeting the 0.7% goal, although Ministers claim we are still ‘on target’.  However, economic slowdown ironically means progress on this now gets a boost. 

If the IMF forecast of a 0.1% shrinkage in the UK economy next year is borne out then the planned expenditure on aid will get a significant uplift when expressed as a percentage of GNI. But economic failure at home is no way to keep our promise to the poorest people overseas.

Whatever painful adjustments are made in the wake of the financial crisis, cutting our aid spending should not be one of them. We have a responsibility to do more and to do it better.