How Can We Get a Grip on Britain’s Huge, Inefficient £12bn Aid Budget?

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By Harry Phibbs | 7:24 am, October 14, 2016

One of the best-known narratives of politics since Labour left office in 2010 has been that of severe public spending “cuts”, as we have been endlessly told that we are in an era of “austerity”.

Yet the reality is that spending has been going up. This year the Government is spending £753 billion. In the next year it is due to be £760.5 billion.

Back in 2011 it was £715 billion. These are the figures in “real terms” – in other words they are real increases which allow for inflation.

However, within that huge total there have been some genuine and controversial cuts. For instance, one item where spending has risen sharply is Overseas Aid. (Pictured above: British aid being delivered to Pakistan)

There has been a decree that it should meet an arbitrary figure of 0.7% of our national income, presently £12.2 billion a year.

That level of spending is second only to the United States – which spends £22.5 billion. However, as a percentage we spend much more – the USA’s spending as a share of national income is only 0.17%.

Does this spending achieve anything?

Certainly there has been a dramatic reduction in global poverty in recent years.

“Over the past 25 years, the proportion of people living in extreme poverty has fallen from nearly 40% to under 10%,” wrote Barack Obama in his recent essay for The Economist.

But even he didn’t attempt to claim aid spending as the key explanation. It is a triumph of capitalism – the very system that he and others on the Left are always sniping at.

Free trade and free markets have proven to be staggering successful.

At the Conservative Party Conference last week the Foreign Secretary, Boris Johnson, gave the same stats and the clear and correct lesson: “Freedom lifts people out of poverty”.

Good news tends not to be news. News is famine, war, pestilence and death. Tsunami, droughts, epidemics.

“Let’s go over to India where we can talk to some people who are significantly better off than a couple of years ago,” is not going to lead the bulletins.

Yet the growth in prosperity is extraordinary. There are 7.4 billion of us on the planet – it is not just millions, or even hundreds of millions but billions who have escaped the misery of destitution in a single generation.

During this transformation, aid has been a cork bobbing along on the tide of globalisation. For all the sumptuous banquets to discuss world hunger and the pious declarations that followed, little difference has been made.

Aid sceptic Priti Patel, pictured leaving 10 Downing Street, has her work cut out for her as Britain's International Development Secretary
Aid sceptic Priti Patel, pictured leaving 10 Downing Street, has her work cut out for her as Britain’s International Development Secretary

Furthermore, some argue that what even the modest impact of aid spending may in fact be damaging.

That was the conclusion in the 1970s of the development economist Lord Bauer. The Zambian economist Dambisa Moyo has argued the same – and makes a powerful case in her book, Dead Aid.

Aid money can be used to strengthen the grip of corrupt and tyrannical regimes and allow, or even encourage them, to pursue disastrous policies. The aid goes to Governments, not to people.

Others would argue that aid spending does no harm but is simply wasted. This is not just a British concern.

USAID, the US government’s agency, has prompted repeated criticism. For example a report into $236 million of USAID in Afghanistan concluded there was “little assurance” that the funds had been spent “as intended”.

Then, of course, there are those – who are sincere and offer well-documented examples – who say it is beneficial, that it does save some lives.

Thrown into this debate is Priti Patel, the new International Development Secretary.

She is from a Ugandan Indian family and has staunchly Thatcherite views, reflected in her prominent role in the Vote Leave campaign in the EU referendum. Before her appointment she was regarded as a sceptic on aid spending and is expected to be rigorous in her approach.

At present, £2 billion of our aid budget is spent for us by the European Union. Much of that is rife with corruption.

Part of the moral case for Brexit is that money may in future be spent more effectively. But it is not just EU multilateral aid that is so unwieldy.

The United Nations is almost as bad as the EU. The Heritage Foundation has concluded that organisation’s “autocracy, secrecy, bureaucracy, and self-aggrandizement reflect the worst of its members”.

The UN’s Food and Agriculture Organisation has commended Venezuela for is “notable and exceptional” efforts to curb hunger. That endorsement can only bolster a regime that is such a humanitarian disaster.

A hunger march in socialist Venezuela
A hunger march in socialist Venezuela

Britain’s annual sub to the UN Food and Agriculture Organisation is £44 million. I’m not convinced this is good value for money.

The World Bank is a bit better, but generally bilateral aid has stronger prospects of keeping some grip over where the money goes than can be expected from multilateral aid.

Another way that the Department for International Development should go further in ending the wrong sort of aid is to cease providing “budget support”.

This is where money is handed over to foreign governments for their general budgets without proper accountability.

More effective is spending on a specific project. For example, DfID’s £28 million Land Tenure Regularisation programme establishes clear ownership rights for land holders in Rwanda – crucial for establishing a functioning economy.

Another success story is how aid spending enables hundreds of thousands of Pakistani children to attend low-cost private schools.

Spending money on state schools often doesn’t work as the teachers are paid but don’t turn up. There are thousands of “ghost schools”.

But there have also been far too many examples of absurd spending. The Sunday Times reports that “last year the Foreign and Commonwealth Office spent £343m on aid programmes that included finding mates for tropical fish, teaching Hamlet to Ecuadorians and an anti-littering campaign in Jordan.”

Patel may well have groaned at being given this particular departmental post.

Yet she has shown early signs of great determination to make a difference.

Before her appointment she had suggested that DfID be closed down – and that trade not aid was the answer.

Now her challenge is to prove herself wrong. Her mission is to ensure that all that aid spending can make our planet a better place.