A new paper by the Institute of Economic Affairs has highlighted some arresting details about the kinds of projects that UK aid money is being spent on overseas, and some of the places that it’s being spent in.  

The government has been funding projects to overcome urban congestion, to investigate the effects of air pollution on cardiopulmonary disease, and to educate the public about the opportunities of crowdfunding and e-commerce. “Well,” one might say; “that at least sounds like it might be vaguely useful”.  But alas, these projects are not for home consumption — instead, they are being lavished on places overseas that could comfortably afford to pay for them themselves. 

The paper goes into some interesting detail and is worth reading in full. Particularly its examination of the relative wealth of some of the target regions in Malaysia, Mexico and China, compared with that of some of the poorer parts of the UK which are now behind these places in terms of GDP per capita.  

According to internationally accepted definitions of Overseas Direct Assistance (ODA), aid spending must be directed to countries whose per capita GNI comes under a particular threshold. A list is published and updated by the OECD’s Development Assistance Committee (DAC) of the countries that are eligible, and this is used by the UK along with all other G8 and EU countries to determine which countries can be recipients of ODA funding under our own legislation.  

The trouble with this, as the paper demonstrates, is that the DAC list includes quite a number of Upper-Middle Income countries that have experienced rapid economic growth over the last 30 years, which has necessarily been geographically uneven. This means that, even though the GNI per capita for the entire country may be beneath the threshold that the OECD uses for assessing eligibility for ODA, these countries contain pockets of relatively high wealth, comparable to that of a fully industrialised country.  

Shanghai and Kuala Lumpur are obvious examples of this, but the authors identify a number more, such as Campeche and Mexico City in Mexico, as well as Shenzhen, Guagzhou and even Ordos in Inner Mongolia, in China. There is nothing either in the OECD’s definitions or in any UK legislation to prevent ODA spending going to such places; nor does there seem to be an informal practice of avoiding such places given that it plainly goes against the point of aid spending. 

The authors use public choice theory to explain why it might be that decision-makers in the UK’s aid agencies are drawn to wealthier places. They have better infrastructure, they are easier and more pleasant places in which to live and work, and the local professional networks that donors can plug into are far better established than in less advanced locations. The paper makes the perfectly sensible recommendation that the International Development Act be amended to take into account regional variation in GNI per capita within recipient nations, and to ensure that aid does not go to places that are too wealthy at sub-national level. 

I think this explanation comes close to grasping the nature of the problem, though it misses what’s actually driving it and makes some errors regarding the nature of the individuals and the systems in control of where UK ODA money goes. That said, the recommended legislative amendment is worth doing on its own terms. 

Firstly, let’s look at the hypothesis that decision-makers are attracted by the lifestyle perks of the wealthier regions. I don’t think this is quite right; officials in the FCDO responsible for ODA spending (formerly in their own separate department of state at the Department for International Development, DfID) are posted to specific locations as diplomats. The sort of people who chose to go into international development as a career are generally the kind of people who enjoy working in tougher parts of the world, and who accrue considerable professional prestige among their peers by spending time in either very poor or war-torn countries. The UK diplomatic service is also very good at making “hardship postings” appealing through special allowances, plenty of R&R time as well as post-tour leave. In the most challenging locations, officers are accommodated in secure, relatively comfortable lodgings in or around the British diplomatic mission, where there is strong camaraderie, and no shortage of booze. It’s not a bad life, all in all, and these are often people who have a knack of staying unmarried and child-free well into early middle-age. 

The authors of the paper also cite the professional networks that are already developed in richer and more advanced places, which make it easier for officials to “do business”.  I think this is far nearer the mark, but too narrow in scope; it’s not just professional networks, it’s absolutely everything about more advanced places that makes it easier to transact. The whole range of physical, legal and institutional infrastructure that marks out a relatively developed society is an incredible platform to do literally anything, compared with places that don’t have it.  But why bother at all, if your whole raison d’etre is to build up that infrastructure in the first place? 

My own hypothesis is that this is being driven by the minimum percentage of national GDP that the UK commits to spending on ODA; currently 0.5 per cent since the pandemic, having been 0.7 per cent for a number of years previously.  The 2005 Gleneagles Summit of the G8, which Bob Geldof timed the global “Live8” music festivals to coincide with, has assumed an almost mythic status among Britain’s professional humanitarians. Tony Blair’s flagship policy of calling on all industrialised nations to pledge 0.7 per cent of GDP on aid spending — designed to mirror NATO’s standard of a minimum of 2% on defence spending — catapulted the UK into a position of moral leadership at a time when British liberals were deeply embarrassed among their international peers by Blair’s role in the invasion of Iraq. 

For many of the intervening years, only Britain and Denmark met this ambitious target; a fact that bought DfiD a huge amount of influence and credibility within the global humanitarian establishment; not only among their counterparts in peer countries, but also with the multilateral institutions and mega-NGOs that dominate the sector.  The result of this has been that, at least since the passing of the New Labour heyday of public sector targets, the ODA target (be it 0.7 per cent or 0.5 per cent) has been one of the few targets that Whitehall takes really seriously.  And this is a specific, annual target that has to be hit in-year, just as reliably as a travelling salesman has to hit his sales target to secure his company car bonus.  Failure to do so will result in angsty op-eds in the Guardian bemoaning Britain’s dreadful moral failings. Although France or Germany may also fail to hit such targets, the people who matter in the international humanitarian world don’t generally read those countries’ equivalents of the Guardian. 

The trouble with very poor and war-torn countries is that they are not particularly reliable places to do anything at all

But at the same time, unlike the salesman who may hope to exceed his minimum target, the Treasury also applies strong pressure to stop the FCDO exceeding the target substantially — so it really does have to be quite precise. This poses a challenge for the accountants in the FCDO who, like accountants anywhere, come to prize predictability of outgoings. 

The trouble with very poor and war-torn countries is that they are not particularly reliable places to do anything at all. Getting a civil infrastructure project “shovel ready” can take anything between six months and sixty months in the sort of country where a flood can make a road impassable for five years. One might spend months preparing a multi-million pound immunisation project, only for a military coup or the outbreak of a civil war to make it too dangerous for the personnel to operate. Or your security spending may have to quadruple, bringing you in over-budget. 

It’s for this reason that aid agencies with minimum spending targets to hit, hedge between the world’s poorest locations and places that are substantially more stable and more economically developed, and thus more predictable. Furthermore, established links with local partners make it easier for our agencies to work in countries where they have a long track-record of humanitarian projects. These are often former British colonies which, especially in Asia, are now doing very much better for themselves than they were in previous decades. 

But direct development work comes with risks of delay anywhere in the world (one need only look at Britain’s efforts to build a high-speed rail line to see that). So increasingly, rather than tying aid spending to building anything in particular, money is instead granted to agencies and NGOs who will spend it on their work, or on long-running programmes over a period of many years, which can be reliably accounted for to a particular budgetary period well in advance. This makes the accounting job back in Whitehall far easier and more predictable. These institutions are much more likely to be located in the more developed parts of countries than in poorer provincial hinterlands. It also tilts the balance of work away from hard infrastructure, and toward the kind of cultural and educational projects that we see in the paper.

Of course, all of this reflects a huge change in the way the bulk of aid is spent compared with the early post-colonial decades, when spending was dominated by direct budgetary assistance; effectively straightforward transfers of cash from the exchequer of the donor country to that of the recipient state. These transfers usually came with strings attached, which were designed to encourage reform and discourage the worst excesses of dysfunctional or tyrannical governments (with very limited success). They often also came with requirements to spend a proportion of the cash on imports of goods from the donor nation, or the awarding of lucrative contracts to their firms. It’s largely for the latter reason that direct assistance fell out of favour with the moral arbiters of the ODA world. 

That donor nations might benefit economically from aid is anathema in the world of international development. This is largely why so many countries that are heavily involved in overseas development don’t actually hit the 0.7 per cent target; because much of their spending entails a “tied” component which involves the supply of goods manufactured back home, which consequently cannot be considered as part of those countries’ official ODA spend. It’s hard to understand why there has been such a sharp divergence in approaches, but it seems that some countries are keenly aware of the pressure of public opinion to see some domestic benefit while supporting the world’s poorest countries, while countries such as the UK and the Scandinavian nations wish to be seen as keeping to the rules and reliably meeting their ODA spending targets. Whilst it may be that we keep to rules and retain our place at the top table of donor countries, one might drive around parts of the interior of Africa or South Asia and and see Japanese or South Korean branded heavy machinery doing the hard work of driving economic development, and question which approach is actually improving countries’ prospects and people’s lives the most. 

And it’s this that we seem to have lost sight of in the battle to hit minimum spending targets; are we doing all that we can with the funds available to improve the lot of humanity with the greatest impact.  Without wishing to let my own political prejudices come to bear, I think that this is downstream of the humanitarian world being dominated by people from the political left (or at least, liberals who have internalised a lot of left-wing assumptions about the world).  They bring with them a belief that spending money on a problem is equal to solving the problem; and the more money one spends, the more one solves. Bluntly, this is not born out by decades of humanitarian spending with decidedly mixed results.  It is the same mentality that measures a government’s stewardship of the NHS by whether its budget has grown as a percentage of GDP rather than whether treatment outcomes on critical diseases are falling further behind those of comparable nations.  But as with the existence of the NHS, retaining and meeting the minimum target of ODA spending seems to be an end in itself for some of our foreign policy establishment. 

Less charitably, the whole exercise seems to contain a large element of diplomatic ego-boosting for a class of people who are paranoid that Britain has become dreadfully unfashionable among its peers. A more clear-headed approach would be to decide a list of priorities; of actual problems we wish to solve in a select list of countries (preferably very poor ones), and then to go about trying to fix them, whilst holding ourselves to the same standards of fiscal propriety we would expect of any other bit of government business. There are some extraordinary low-hanging fruit on nutrition and indoor air pollution that we could set ourselves the task of fixing; although these would involve taking on some especially pernicious hobgoblins about GMOs and climate held by the big NGOs.  This may or may not mean spending a bit more, or even a bit less, than we currently spend.  But it would seem a more logical, and indeed a more humanitarian approach than patting ourselves on the back for spending an arbitrary percentage of our national income.