International aid: changes below the surface

UK foreign aid spending is in the headlines today as Bill Gates has urged the government to keep spending 0.7% of national income on aid. This long-standing international target was put into legislation in 2015, when the International Development (Official Development Assistance Target) Act was passed, making it a legal requirement for the UK government to give 0.7% of its gross national income as international aid (Official Development Assistance) each year. Early in April the Department for International Development (DFID) published its provisional figures for 2016, showing that the UK had hit this target exactly, just as it had done for the previous three years.

However, this apparent lack of any change does not tell the whole story. The total amount of aid and the list of departments providing it have changed significantly, and show some interesting longer-term trends.

How is the target defined?

The target is for 0.7% of gross national income (70p of every £100 made) to be spent on aid.  Gross national income is calculated using internationally-agreed standards. These standards are updated periodically, with the most recent major update generally coming into effect in the UK in 2014. This revision raised the UK’s gross national income level, meaning that higher levels of aid were required in order to meet the 0.7% target.

The UK has taken a phased approach to using the new definition in the aid target, reporting figures based on it in 2013 to 2015 but using the old definition as the main basis for the 0.7% target. From 2016 onwards, the target is calculated using the new definition, which explains why the total amount of aid has increased by £1.2 billion (10%) – to a total of £13.3 billion – but the ratio of aid to national income has stayed constant.

UK aid as % of gross national income calculated using old and new definitions, 2010-16

Departments providing aid

DFID provides the majority of aid, but for the past few years its share has been decreasing. This trend has continued in 2016, when DFID provided 74% of all aid.

Aid by government department, 2009-2016 % total aid

Most of the aid provided by organisations other than DFID is spending directly by other Government departments – for example, the Department for Business, Energy and Industrial Strategy, the Foreign and Commonwealth Office and the Home Office were all major funders in 2016. However, significant contributions are also provided in other ways.

 Net aid, £ millions % of total aid Department for Business, Energy and Industrial Strategy 687 5% Conflict, Stability and Security Fund (CSSF) 575 4% Foreign & Commonwealth Office 512 4% EU Attribution (non-DFID share only) 478 4% IMF Poverty Reduction and Growth Trust (PRGT) 446 3% Home Office 362 3%

Three organisations in this list stand out as non-departmental.

First, the Conflict, Stability and Security Fund is a pot of money set up to tackle “the causes and effects of conflict and instability in countries of strategic importance to the United Kingdom”. It funds a number of different activities, only some of which count as aid; it also covers other objectives (for example relating to peacekeeping, security and defence).  Some of these operations are secretive and sensitive – the Fund has received criticism for a lack of transparency about how its money is spent.

The EU and its institutions are major contributors of aid, providing €15.6 billion in 2015. Some of the UK’s contribution to the general EU budget goes out as aid, so this part is counted towards total UK aid – this accounts for a total of £976 million in 2016 (counting both DFID and non-DFID elements of this).  After the UK leaves the EU, this contribution will no longer be made, so aid will have to increase in other ways to continue meeting the 0.7% target. Separately, the UK contributes to the European Development Fund, which is the EU’s main method of delivering aid to many countries, but is not funded from the EU budget.

Lastly, the IMF Poverty Reduction and Growth Trust received a substantial contribution from UK aid. The Trust offers low-interest (sometimes zero-interest) loans to low-income countries, and has been increasing its activities recently, funded partly by the proceeds of the IMF’s sale in 2010 of over 400 metric tons of gold. It will also continue to receive funding from the UK; in February 2017, the UK agreed to provide loan resources of up to about US$2.7 billion.

Smaller amounts of aid are also provided by some other non-departmental sources – for example, the cross-government Prosperity Fund provided £38 million in 2016, and the BBC World Service provided £24 million.

The trend towards organisations other than DFID providing aid has caused some concern from those who think that these organisations may lack the necessary skills, focus and accountability that a specialist department like DFID can provide. The International Development Committee concluded as much in an inquiry published last month, singling out the Prosperity Fund and the CSSF as areas of particular concern; another ongoing inquiry is currently examining the effectiveness of other Government departments.

The global picture

The UK was not alone in increasing the amount of aid it provided in 2016 – the total given by 29 of the world’s richest countries rose nearly 9% to $143 billion. However, this rise was again not the whole story: the amount spent by these countries on looking after refugees within their own borders rose by 27.5% and humanitarian aid rose by 8%, while the amount given to the world’s least developed countries fell by nearly 4%.

 

Picture credit: UK aid shelter kits are loaded for shipment in Dubai by DFID – UK Department for International DevelopmentCreative Commons Attribution 2.0 Generic (CC by 2.0)