Will a new secretary of state mean a new approach to in-donor refugee costs?

As the dust settles following Penny Mordaunt’s departure as the secretary of state for international development, many in the sector will be looking with keen interest to see how Rory Stewart, with previous experience in development, intends to pursue DFID’s remit to end extreme poverty.

Penny Mordaunt recently called for an increase in the amount of Official Development Assistance (ODA) spent on supporting refugees in the UK, appearing to challenge the current OECD DAC rules which now include clear definitions on what can and can’t be paid for out of the aid budget, and for how long.

Many in the aid community would oppose such a move because this would divert aid away from other priorities, and because a key principle of DAC rules is that aid should be spent on development and humanitarian needs in recipient countries.

But what is the impact of introducing greater flexibility into the interpretation of these rules in practice? Countries should be lauded for providing a home to vulnerable people escaping conflict and persecution, but it is important to strike a balance and make it clear how much ODA should be spent on supporting refugees in donor countries, and for what.

What are the global trends and potential implications for ODA?

Among DAC countries, the share of in-donor refugee costs has been rapidly increasing in recent years, especially among EU countries, with a particularly marked increase related to the 2015/16 refugee crisis. In 2016, DAC donors spent more on refugee costs in-country (14% of ODA) than on humanitarian aid (12%). In 2017, EU donors (plus Norway) reported 75 times more in-donor refugee costs than in 2010. In some cases, such as Germany, Italy and Sweden, EU member states became the largest recipient of their own ODA [PDF].

Last month, new OECD DAC figures showed just how linked ODA and in country refugee costs are – less aid being counted as in donor refugee costs has meant foreign aid in 2018 fell slightly in real terms from 2017. If we take refugee costs out of the equation all together for both 2017 and 2018, the figures show that aid contributions stagnated, prompting growing concerns that donor countries are turning their backs on the world’s poorest people.

What do OECD DAC rules say on in-donor refugee costs, and why were they recently tightened?

Right now, OECD DAC rules [PDF] state that direct in-donor refugee expenses for temporary sustenance (food, shelter, and training) can be counted as ODA by the host country for the first 12 months. Other costs, such as capital costs for the construction of facilities, are explicitly excluded thanks to the recent tightening of rules.

Before the recent rule change, there was inconsistency in reporting amongst DAC countries, both with regards to what time period members used, but also the types of expenditure they reported.

Clarification around the rules for in-donor refugee costs has been needed for some time in order to present an honest picture of how much help is going directly to the countries which need it most.

How much ODA does the UK spend to support refugees in-country?

The UK government is spending an increasing amount of ODA on domestic refugee support, which has risen sharply from £7m in 2009 to £378m in 2017. The previous international development secretary’s calls for increases in the UK’s already expanded ODA expenditure on in-donor refugee costs would mean including costs such as long-term care for disabled child refugees and capital costs of facilities, and staff costs associated with long-term support.

No one would deny that these are important services which must be met for vulnerable people, but these costs cannot be reported as ODA under the current DAC rules for good reason. Any costs past the first year of a refugee’s arrival in the host country cannot be counted because after this time refugees are, rightly, treated as residents and should be provided with the same treatment as nationals. ODA should also always go to the countries who need it the most, rather than be redirected for domestic purposes.

Many DAC members and civil society groups have argued that recording money spent on refugees under ODA distorts aid reporting and gives a misleading picture of the true amount of money DAC members are spending on aid. Those advocating this position previously included the UK, which had been firmly opposed to the idea of reporting in-donor refugee costs as ODA since the option was introduced in 1988. Since 2010 the UK position has changed considerably, as highlighted by Penny Mordaunt, but recent events provide an important opportunity to rethink this approach.