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Squaring the Circle: is it time to stop this 0.7% nonsense?

July 13, 2012

People and organisations in the UK’s overseas development sector are getting hot under the collar. This is because the government is not prioritising legislation to enshrine a perpetual commitment to spend 0.7% of UK Gross National Income (GNI) on overseas development aid (ODA). Letters are being drafted, articles are being written, politicians are being lobbied. After all, this issue has cross-party support, so why not just rush it through parliament?

Well, there are several reasons why not.

First, it’s politically naïve to push this issue now. In case NGOs haven’t noticed, most voters are not clamouring for this to be made into law. In fact, most people would rather see UK aid reduced, not increased in line with the 0.7% pledge. The Daily Mail is among voices asking why we are helping people far away when we have so many problems at home. On the whole it’s only aid specialists and some among the political elite who want to increase aid. So pushing the Overseas Development Spending Bill through parliament now would be like raising a red rag to a bull. Asking a government already under pressure to raise a red rag to a bull seems rather naïve – especially when it has already committed itself to raise the aid budget to 0.7%, and when its own backbenchers already have difficulty explaining the overseas aid budget to their constituents.

Second, there’s no logical basis for 0.7%. In fact, what is this obsession with 0.7% all about? No-one really seems to know where it came from. As far as I know, someone calculated a few decades ago that the investment gap in what was then known as the Third World was the equivalent of 0.7% of OECD GNP, ergo by transferring that amount from the First to the Third World over a period of a few years, developing countries would catch up. That rather simplistic notion of “development” has long been blown apart, but somehow the mythical, or perhaps I should say “mystical” figure of 0.7% remains. Paul Collier has argued that because aid is a global public good, there is a problem of free-riding and therefore it’s useful to have a target, however arbitrary, to aim for and hold governments to. Hmm, fair enough perhaps, but why should it be 0.7%?

Third, surely it’s basic economics that an arbitrary target creates a perverse supply incentive?

Fourth, it seems absurd to enshrine this in law. Are any other budgetary targets similarly enshrined, such as the percentage of GNI to be spent on defence, education, health, etc? I doubt it, as it would make little sense to base one’s national education, health or any other policy on the cost of inputs, when one should rather be focused on the outcomes. The same should be true of aid. In any case, I find it profoundly undemocratic to pass laws which simply cannot be enforced, and which bind the representatives of future UK voters to spend a fixed proportion of their voters’ money on overseas aid, whatever circumstances they may be in at the time.

Fifth, and most important: it’s the quality of aid that matters, not the volume. The current government has rightly emphasised results and value for money in its approach to overseas aid. This is partly to head off the anti-aid critics, but it’s also a healthy reaction to more than a decade in which UK aid grew and grew and grew, but with far too little attention being paid to whether it was targeted at the right issues, in the right places, nor whether the theories behind it and delivery mechanisms being used were right. One can certainly argue that the current government has swung too far in the other direction with its near-obsession with value for money, but even so it’s understandable it felt the need to do so.

Squaring the circle

The UK government has a difficult circle to square. It is committed to increasing aid to 0.7% of GNI, with or without passing the Bill. Even though we are in recession, that implies an increase of more 25% in aid expenditure over the course of a few short years. Meanwhile, its criticism of the previous government’s approach to aid means it has called into question some of the delivery mechanisms which allow DFID (the UK’s Dept. for International Development) to spend money in fairly big sums at a relatively low internal cost: large scale budget support to developing country governments, large grants to the UN and other inefficient multilateral organisations, and strategic grants to UK-based development NGOs, to name three. It is also committed to bringing down DFID’s in-house costs, which are already among the lowest in the world compared to DFID’s international peers, by cutting staff numbers and their admin support (ask any DFID staff member how easy it is to get a new stapler, or get the photocopier fixed….). The government is also committed to spending about one-third of its overseas aid in so-called fragile states, where systems are weak, governments are relatively undemocratic and unaccountable to their people, and where aid needs to be programmed with particular care if it is not to be wasted, misused, stolen or to do outright harm. And finally, people in the aid sector now understand that “development”, especially in fragile contexts, is far more complicated than providing roads, schools and clinics – it is about the emergence of stable, democratic and accountable insitutions including a social contract: thus development aid is also far more complex and complicated than we used to think.

So in short, Her Majesty’s Government is trying simultaneously to increase overall aid expenditure, spend a greater proportion in difficult places, tackle ever-more complex problems and find new, more effective and efficient delivery mechanisms which are fit for new and more complex purposes. How can it possibly square that circle?

A few years ago I was discussing this issue with an ex-minister for UK overseas development who by then had long retired. I explained why I felt it was more important to focus on the quality, not the quantity of aid. He readily agreed, but he told me that when he’d been a minister, he had felt constrained by the politics of aid to keep increasing the ODA budget, even when his officials told him they were overwhelmed. I think he felt that it was important to keep stepping up the voltage applied to ODA, lest momentum be lost.

Squaring almost any circle is made harder by politics, and I would not go as far as to recommend cuts in the UK government’s aid spending. That would be naïve, and probably also wrong. But the argument against reducing DFID’s staffing and admin support, making it harder to deliver aid effectively in fragile contexts is one that can and should be made. And I certainly think it’s time to stop pushing for the 0.7% figure to be reached as fast as possible. Above all it is entirely the wrong moment – if there ever is a right one – to enshrine 0.7% perpetually in law.

We have to start having a more honest conversation about development, and development aid. The message of Make Poverty History and those who campaign incessantly for 0.7%, that global poverty can be overcome simply by financial transfers, is misinformation which insults people living in poor and fragile countries while doing little to change their long-term prospects. Development is about political change and societal transformation in fragile contexts, not just financial transfers. It’s time to move the terms of this conversation on, before the Daily Mail does it for us.

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18 Comments leave one →
  1. Peter Reed permalink
    July 13, 2012 9:13 am

    Phil, I completely agree and have been saying the same for some time. I work as an international development consultant, and like you, I have worked in 12 African countries and 40 countries over the last 30 years. DFID has always been a good client for me – both individually, through joint-donor assignments, and through corporate contracts for which I was an Associate, so – far be it for me to bite the hand…etc. but I now have serious reservations. One cannot blame DFID, or Mitchell for that matter – they are hardly likely to refuse the budget they are given, or to say they don’t need it, as India recently did, much to their embarrassment! Other Departments who have suffered cuts (24% I believe for FCO) must be frustrated with the seemingly never ending largesse that is provided for DFID and I am sure that you are right; the public do not understand it (many think it is for humanitarian aid and somewhat disingenuous photo opportunities often reinforce this misconception). As you rightly say, the concentration, or focus of the budget around our own national security was always going to inflame the left in any event, but it is even more worrying that it becomes very difficult indeed to make a justifiable business case for how you are going to spend ever increasing amounts (with measurable results) in the most challenging of operating environments – where in the most extreme cases it is even difficult, and certainly expensive, to mobilise civilian consultants. The result is that ever larger amounts will have to be shovelled out of the door to the IDAs – the World Bank, the EU, UNDP etc. even when DFID themselves sometimes question the competence or probity of the resulting expenditure. There is no logic in the 0.7%; there is no justification for it, and increasing scrutiny by the likes of the Daily Mail will inevitably lead to increasing scrutiny by Select Committees and the Paliamentary Accounts Committee (quite rightly), with the unfortunate result, and knee jerk reaction, that ‘low hanging’ fruit will be culled first – ‘fat cat consultants’ fees, business class air fares etc. when the big bucks disappear down black holes in some very ‘dodgy’ places that would make the average taxpayer blanche if they really knew the extent of how little of it reaches the intended beneficiaries.

    • July 13, 2012 9:52 am

      Thanks. I suppose the other thing to add is that more and more development will be “done” by the big consulting companies through huge and rather inflexible contracts which are not necessarily the most appropriate delivery mechanisms either….

  2. July 13, 2012 11:41 am

    Actually the commitment came from the reaction to the first failed decade of development (the 1960s). The result was 0.7% of GDP being deemed necessary in ODA “by the middle of the decade” (the Seventies) in UN General Assembly Resolution 2626 in October 1970. But even then no one thought this was a panacea, and foriegn direct investment was given a greater priority even then – the paragraph preceding the 0.7% for ODA set a 1% of GDP target for net capital flows for for foreign direct investment.

    It is also still the case that many who advocate for 0.7% of GNI for ODA do so alongside full implementation of the Aid Effectiveness principles and Paris and Accra accords, as well as implementing real positive capital flows through tackling issues such as transfer pricing, commodity royalties and corporate tax avoidance. But as you rightly point out, and as does UNGA 2626, development requires more than financial flows. Altering trade relations and espcially the location of value in the chain is also vital. And of course other types of inequalities need to be tackled, especailly those related to rights and freedoms.

    In fact, all the bits of the puzzle are needed for development to succeed, and they have allways have been. They should not now be presented to policy makers in some form of beauty competition.

    But for me, the one overriding reason why we need to deliver the 0.7% figure is trust and credibility. in this multi-polar world moving global issues such as climate change agreements forward will only be possible if all states trust each other to deliver. Having stated repeatedly how committed donors are to achieving the 0.7% figure for more than a generation means that credibility is really on the line if it is jettisoned now because of Daily Mail headlines. Moreover, the facts are that opinion Poll surveys (recent Eurobaramoter for example) continue to demonstrate high levels of public support for ODA – even in the most impacted Euro crisis countries.

    So don’t get too frightened when you pass the Daily Mail in the newsagents and perhaps overall the development Community can continue to argue for both more and better aid.

    • July 17, 2012 2:43 am

      Excellent comment.The Center for Global Development also wrote a piece on the 0.7% target’s history and un-usefulness in current context, albeit for America’s own aid percentage.

  3. Ian Symons permalink
    July 14, 2012 12:57 am

    I quite agree on the inadvisability of trying to push a 0.7% Bill through the UK Parliament in the present political environment. With the Conservative Right in its current bullish mood, and the UK economy staggering along, the last thing that the pro-aid argument needs is a big and largely unnecessary opportunity to stir up anti-aid Little-England feelings, backed joyously by the Mail, Express, etc. At the margins there could even be a risk of losing a vote, or having the Bill traded off against something else, which would be an unequivocal defeat for aid. So for now it is best to keep quiet and carry on with the policy commitment to increase aid.

    Having said that, it is still necessary for campaigners to keep promoting the pro-aid case and ensuring that ground is not ceded on the principles. The sidelining of the Bill is a good opportunity for them to do this without actually threatening anyone or giving the anti-aid tendencies a platform. So I wouldn’t attack them: it is an essential part of the long-term high-level political debate that they use their voice in that way; and it need not detract from other debates about how aid is spent.

    The logic of having a 0.7% Act may be a bit odd, but pre-2010 election posturing got us where we are, with all major parties claiming that they want the legislation (which could perfectly democratically be repealed by a future Parliament). So the problem now is that backing off from the election pledge could only be interpreted politically as backing off from aid.

    The absence of empirical evidence on the meaningfulness of 0.7% is not really the point, unless anyone has a cogent case for choosing another number. The political messaging of 0.7% matters far more than how it was reached. Even if the original commitment is now largely mythical, with its origins lost in the mists of time, junking it would very un-mythically break it. I’m very cagey about quality vs volume arguments, the fall-back line of aid cutters down the decades: we need to focus on how to make more aid work, not undermine those arguing for it.

    Having said that, I quite agree that 0.7% is the biggest daddy of all input targets, and DFID’s task in managing expanding programmes sits uncomfortably alongside its (resultantly) ever more insistent public focus on outcomes and value for money. Whether DFID can in fact square that circle – with plausible evidence, with an increased focus on “fragile states”, and with fewer staff – let’s hope.

    It is perhaps worth remembering that results and vfm are not new: they have always been needed to help justify aid, expanding or not, by all governments. The current government has certainly laid it on thick, and new processes have been introduced; but the importance of the concepts, and the use of aid targeting and bureaucratic measures to implement them, are not as novel as the PR suggests. DFID probably does by and large keep improving the way it does business, but that doesn’t mean that everything it did in the past was a waste of money!

  4. July 16, 2012 6:58 am

    Permission to reblog this?

  5. July 16, 2012 7:11 am

    Reblogged this on Ipeanddevelopment's Blog and commented:
    An even more detailed piece with provoking reasons why aid effectiveness and development should come before 0.7%

  6. Bongs Lainjo permalink
    July 16, 2012 4:51 pm

    The Brits are not alone, though I stronlgy believe that the 0.7% GDI serves not only as a constant reminder, it also helps in highlighting the inadequacies of our respective governments in helping the less fortunate. Below is my response from a Canadian context.

    Re: Is Canada’s International aid in intensive care?

    Early this month in a not-too-surprising low key move, the PM appointed Mr. Julian Fantino our new Minister of International co-operation.

    If earlier expectations by the media and a group of ambitious and motivated Tory back benchers were any indication, this was a prelude to a bigger cabinet shake-up. Unfortunately, Harper had a different agenda. As we now know, soon after this nomination, the PM’s office informed Canadians that no major reshuffle was planned in the immediate future. The relevant backbenches will have to live with this disappointment. In the meantime I’ll like to encourage them to keep their cool, hold their breath and remember Shakespeare’s ‘ambition is made of sterner stuff’. With regard to the former minister of International Co-operation, her departure deserves my silence at this time.

    Looking at our foreign aid history between 2001 and 2010, one sees evidence that while during this decade we had two governments (Liberal and Conservative) there is every evidence to credit the conservative government for creating many of the success that exist today. For example during this period and according to OECD report, Canada foreign aid as a percentage of its GPD crawled from.22 per cent in 2001 to .34 per cent in 2010; placing Canada 14th out of 23 developed countries. Most of Canada’s increase occurred during the Tory years. In contrast, Norway’s funding increased from .32 to 1.1 during the same period. And here credit also needs to be given to Bev Oda (her controversies and extravagance notwithstanding) through whose initiative we accomplished what we have today.

    The liberals had their opportunities. These were all squandered and missed partly due to complacency and partly due to incompetence. For example, during the Liberal years, the government introduced the HIV/AIDS preferential drug pricing policy for the developing countries. This effort stone-walled, finally changed hands and was killed by the conservatives. In comparison, a similar effort through the presidential President’s Emergency Plan for AIDs Relief (PEPFAR) program remains one of Bush’s greatest achievements that will overwhelmingly contribute to his legacy. One does not need to be a rocket scientist to recognise the success generated by this initiated. For example, in countries like Uganda, Kenya, South Africa (credit to current government), Lesotho, Malawi, Botswana, Swaziland, the coffin industry has progressively (with increased access to ART) been reduced to a struggling industry. Recently, the Global Fund reported that within a period of five years, the annual number of AIDS deaths in Namibia had dramatically fallen from 2700 to 57 cases. Canada blew its own chance to make a dent in this area.

    There is a misperception among members of some developed economies that foreign aid is a favour. Nothing could be further from the truth than that. While it is true that one driving force behind foreign aid is “interest”, one needs to remember that developed countries have a moral obligation to assist members of less developed countries. Harper may be an economist; yet he still needs to be reminded that replacing compassion with trade is nothing but a misguided policy. In one of his statements, the PM indicated that Canada was going to withdraw from Africa and concentrate with trade promotion in South American countries. Trade and compassion in foreign aid should be complementary and not mutually exclusive. This government also needs to be reminded, that foreign aid should be prioritized and directed to the more needy countries. For example, in Sub Saharan Africa (as in many mid level economies), non-communicable diseases have become a significant component of their respective burden of diseases (BOD). These countries need help now and Canada has the resources to help.

    With regard to the new Minister of development assistance, Mr. Fantino, he has his job clearly cut out for him. While he’ll need to study and understand portfolios and outstanding issues, he will also need to grapple with among other things, maintaining funding for foreign assistance and minimizing the bureaucracy.

    If Canada’s most recent budget is any indication, there is need for concern as the conservatives have now indicated that between now and 2015 monies that were allocated for foreign assistance, 5.16 billion, will be reduced by 7.5 per cent of 377.6 million by 2015. This is something that we all will need to appeal to government to reconsider. And here, Fantino has an important role to play. He needs to be ahead of the curve because time is not on his side. As the adage goes he needs to “make haste while the sun shines”.

    Excessive bureaucracy remains one of the key challenges that will need to be addresses too. Its negative effects cannot be adequately emphasized. And equally as important is the need to address the ripple effects or outcomes at the recipient level. For example, a few years ago, I was working with a foreign government. During one of our meetings, one implementing partner (IP) asked me why after CIDA approved funding in august of that year, they had to wait until January of the following year for the funds to come in. This IP went on to elaborate on the sufferings endured by staff immediate and extended family members because at every household, funds were required for food, education, health etc. As a follow up, I immediately went to the CIDA office to find out why this short-coming existed. CIDA indicated to me that the reason was because the treasury board (TB) met twice a year (June, January) to approve funding and any request in between had to wait. It is my hope that Fantino will endeavour to synchronize CIDA approval and TB meetings.
    With these dynamics, it is fair to say our foreign aid is between primary care and intensive care.

    Bongs Lainjo

    • July 17, 2012 5:15 am

      Thanks Bongs Lainjo – a neat primer in the current politics of Canadian ODA – all news to me. One of the strange fascinations of ODA is our ability to ignore the politics around both the giving/lending/allocation of aid, and the receipt/spending and use of aid. I came to the conclusion some time ago that democracy is a diffcult political system within which to provide effective aid, as transparency means OECD country MPs are prone to ask difficult questions about why “our money is supporting their ditctators”. This obstructs the pragmatic approach of working with the grain to change the grain in fragile countries http://www.international-alert.org/sites/default/files/publications/MDG.pdf . As for the fragile countries themselves, I believe aid can have a democracy-enhancing effect, provided it is programmed with that as an overarching goal, rather than as a possible side product.

      • Bongs Lainjo permalink
        July 17, 2012 5:32 am

        I could’nt agree with you more Phil. My problem with trying to use Western bench marks as a gold standard to influence developing countries in implementing programs. We all know that if successes over the last six decades were sustaininable, foreign aid as we know it will be history. Unfortunately we are still far from achieving that objective.

        My other point is with regard to the buzz word “democracy”. We keep on pushing it down the throats of national partners with no regard to limitations that have rendered our efforts “unsuccessful”. The question funding Agencies need to ask themselves is: Is democracy as we know it in the West relevant to our developing partners? There is compelling need for a paradygm change. Until these kinks are ironed out, we are all in this for the LONG haul, unfortunately.

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