What sort of UK aid programme is emerging after the cuts?

 

Last week I posted a bit of a rant about UK aid cuts. The next day, Ranil Dissanayake had a piece on CGD’s blog looking at what kind of post-cuts aid programme is emerging under the Foreign, Commonwealth and Development Office (FCDO). It’s brilliant, so I asked to post an abridged version (the original is roughly twice as long).

As soon as we learnt that the aid budget would be thrown into the volcano to appease the fiscal gods, it should have been clear that even with a perfect process of prioritisation many good things would have to be sacrificed. There was never enough fat to avoid cutting the lean. What has not been clear, however, is if the cuts are being used to realise a new vision of what UK aid is for.

ODA may be coming ‘home’ to FCDO—for now

Since the 0.7 percent legislation passed into law, an increasing proportion of UK official development assistance (ODA) has been captured by non-development departments focusing more directly on benefits to the UK, and less on poverty reduction and the welfare of the poorest people and countries.

The initial shape of the cuts suggests a partial undoing of the damage done by this mission creep and dilution of focus. If we take the government’s numbers at face value, the proportion of the aid budget administered by the primary development department has risen to 81 percent, from a nadir of 69 percent the previous year, and not far off the level it routinely reached in the pre-0.7 years.

This is a good thing: FCDO inherited DFID’s machinery for rigorously pursuing value for money in aid spending, through its evidence-informed business cases, internal peer review, and scored annual reviews. Reflecting this, independent evaluation results for DFID were systematically stronger than the rest of Whitehall. Deeper cuts for less effective departments suggest an increase in overall portfolio quality, and an intention on the part of FCDO to retain control of ODA in the future.

2021 is the first true FCDO budget, and hints at the future

Foreign Secretary Dominic Raab announced seven priority areas for FCDO: climate change and biodiversity; COVID-19 and global health; girls’ education; humanitarian preparedness and response; open societies and conflict; science, research and technology; and trade and economic development. Additional categories of spend appear to be primarily multilateral contributions, subscriptions to other organisations, or allocations to non-departmental bodies.

The seven areas are new aggregations, which resist comparison to existing data. Despite this, with a great deal of detective work and a little creativity it is possible to make an indicative comparison between the 2021 portfolio and the structure of spending by DFID and the Foreign and Commonwealth Office (the two agencies that were merged to form the new FCDO) in recent years. It isn’t perfect, but it does give us a glimpse at what is changing.

It’s no surprise that in a year that the world is battling a global pandemic and in which the UK is hosting a major international climate conference, we see dramatic pivots towards global health and climate change. This makes sense for 2021, but likely also represents a genuine realignment of what UK ODA will be used for, at least in the medium term. The COP2026 climate conference is unlikely to pass by without new multi-year commitments, and investment will be required to repair the direct and indirect costs of COVID-19, as well as to build a system that reduces the risk of or improves capacity to respond to future pandemics.

Climate change and global health are the only two areas which appear to be getting an absolute increase over previous years. In other cases, FCDO priorities have taken severe cuts in absolute spending, but nevertheless received a modest increase in their share of bilateral ODA. That is the case for girls’ education and humanitarian preparedness. It is striking that, of the priority areas, trade and economic development has taken a substantial proportionate cut (to say nothing of the brutal nature of its absolute reduction), while open societies and conflict has been protected as a share of bilateral aid.

These changes tentatively suggest three strategic choices made in reshaping the portfolio. First, FCDO has not so much established seven priorities as made them the almost exclusive domain of the funding over which it manages directly. After removing allocations for development banks, non-departmental public bodies, and the financial transactions that were ring-fenced by the Treasury, virtually everything else is allocated to these seven areas.

Secondly, the list of priority sectors suggests that FCDO is pivoting towards global public goods. The COVID and global health and climate categories are by far the biggest winners in 2021, and also the two most closely associated with activities that generate returns outside of poor countries as well as within their borders. This isn’t necessarily in itself good or bad, but unless done carefully it can be less pro-poor, at odds with the Foreign Secretary’s stated ambition to focus on the bottom billion.

Thirdly, FCDO has made a sudden and dramatic break with the trend in both DFID and the FCO of increasing spending on economic development activities in the last few years.

Collectively, these three strategic shifts provide a hint at what FCDO might be aiming at: to be one part pre-0.7 DFID, when funding was focused on sectors where the volume of spending available might make a practical difference (i.e. much more on the human development sectors and less on economic development); one-part vehicle for the pursuit of global public goods that the UK has a foreign and development policy interest in; and one (relatively small) part funder of the traditional domain of foreign policy, under the ‘Open Societies’ category.

2022 and beyond could be better—or worse

This isn’t a bad vision for what FCDO should look like in the future. For the organisation tentatively outlined above to succeed, though, it will need to navigate three pressing challenges.

The most obvious is the circling vultures over the aid budget. While the FCDO won the first battle by imposing stiff cuts on other government departments, no doubt these same departments are now sharpening their knives in preparation for the forthcoming spending review.

Another pressing challenge is internal: how to define and organise spending on global public goods in a way that is an efficient use of resources for development outcomes and makes a dent in the global challenge they are targeted at. This is not a trivial problem. Often, spending in poor countries is an inefficient way of solving global problems. At the same time, addressing global problems is often not the number one priority for poor countries themselves, when the same resources could be used to address local problems with larger welfare implications for the poor. FCDO need to find a way to spend on global public goods that makes a difference to global problems while simultaneously solving the local problems that matter most to poor countries requires. Their forthcoming development strategy should address this directly.

Thirdly, applying the approach to evidence, evaluation and learning that DFID was rightly celebrated for will be much more difficult for FCDO, focusing as it will on global public goods and joint development/foreign policy objectives as well as traditional development problems.

2021 will be a mess, but if FCDO can navigate these challenges, they may yet emerge with a portfolio that makes an impact, at least where it still focuses.

This blog benefited from excellent comments and support from Euan Ritchie, Atousa Tahmasebi, Mark Plant, and Ian Mitchell. All errors and omissions remain the author’s.

 

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