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Ben Farrugia: Promising to ring-fence the international aid budget seems naive when you consider that 14% of DfID's budget never reaches those for whom it is intended

Picture 9 Ben Farrugia is Deputy Research Director at the TaxPayers' Alliance and author of Lost along the way: The cost of the UK’s international development programme, which is published today by the TPA.  

International development isn’t some sort of luxury item. Although cuts in Government expenditure are inevitable, it would be wrong – and short sighted – to make drastic cuts in the UK’s overseas assistance budget. Our contribution to the world’s efforts can do some good, and not only in preventing catastrophes. If money is spent right, progress in even the most difficult countries is possible.

However Conservative promises to ring-fence the development budget are misconceived. The current approach to development – embodied by DfID – is not delivering the progress that many had hoped, and while the challenges are certainly great, for the money that’s been invested over the past decades there are too few genuine success stories. 

Nor is the current approach cheap. In the new TaxPayers’ Alliance report, Lost along the way, we estimate that in 2007-08 over £729 million – 14% of DfID’s total budget – never made it to the people and communities for whom it was intended. For the chain between UK taxpayer and aid recipient is complex. DfID itself only directly manages around half of its own budget (£2.4 billion in 2007-08), which is divided between humanitarian assistance (i.e. emergency relief), technical assistance and budget support.

Most of the other half of DfID’s spending is directed towards – or through – its big multilateral partners:  the EU, World Bank, UN. Such large bureaucratic structures enable better coordination of donor effort, but they also cost a bit to maintain. In 2007-08 (the most recent year for which data was available when the report was written) the average administrative cost of such multilateral organisations was 17.6% of their total budget.

It is a similar story with the NGOs through which DfID does a lot of its on-the-ground work, and through which it spends the remainder of its budget. These bodies received over £313 million in 2007-08, but again a significant proportion – 17% – went on costs not directly linked to their front-line activities. 

Of course there is always going to be a cost to doing business, in any organisation or industry, and international development is no different. DfID will never be able to eliminate all costs. But taxpayers will be surprised that some of their money goes on lobbying and advocacy programmes designed to change UK public attitudes to development. 

As donors look to improve the effectiveness of their aid, the costs involved are an important part of their deliberations. If the same share of total DfID spending was lost to non-front line costs in 2008-09 and it was in 2007-08, over £812 million would have been lost along the way, swallowed up by the development industry. If DfID’s budget increases as planned, in 2010-11 over £1 billion of the UK’s development effort will be lost to administrative and other non-front line costs.

In light of this, promises to ring fence budgets seem naive. It risks locking problems, tying the UK to the highly bureaucratic approach to development. Moreover, those who are lobbying hardest for spending targets and ring fencing are also those that have the most to gain from increases in an unchanged system: multilateral organisations and NGOs. The Conservative green paper implicitly acknowledged some of these issues, but its solutions were thin on the ground. In the face of the current fiscal crises we have the opportunity to try new and radical approaches to development. For as progress in the developing world falters, people would be right to question whether the current approach really delivers value for money.


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