This week will see the launch of the twice –delayed, highly anticipated comprehensive spending review.
The review will set out departmental spending envelopes for the next 3 years. It may also give us a glimpse of the future of the UK’s Official Development Assistance (ODA) in a post-0.7% world. It’s unclear what the spending review will tell us. Without a dedicated international development department, it may be hard to tell what the UK’s total ODA budget for the next few years is, but with further cuts through the backdoor being planned, the devil will be in the spending review’s details.
What’s at stake?
You might be thinking that the ODA 0.7% debate, at least in terms of its size, is over. This summer’s vote in parliament solidified the aid budget at 0.5% of GNI for the next few years or at least until two fiscal thresholds are reached. However, concerns are growing that the Treasury intends to use ODA reporting rules and accounting tricks to raid the UK aid budget, this time by targeting funding specifically allocated to support low and middle income countries respond to and recover from the pandemic.
The government has access to additional, new resources to support low-income countries, resources that were not available when the decision to drop the aid target to 0.5% was made. Prominent among these are Special Drawing Rights (SDRs), issued specifically to support Lower and Middle-Income Countries (LMIC) respond to and recover from the pandemic, excess COVID vaccine doses and debt relief to Sudan. All count as ODA under the OECD DAC rules.
While the specific rules for counting excess vaccine doses are still being debated at the OECD DAC, re-channelled SDRs are eligible to be reported as ODA at 31% of their value like other concessional loans as is debt relief. It’s looking almost certain that excess vaccine doses will count as ODA as well, which will mean savings will need to be found elsewhere in the ODA budget. And the experience of cuts processes in 2020 and 2021 show that it is likely to be the poorest countries that bear the brunt of costs.
Whether they can or do count as ODA is one for the OECD-DAC to determine, but the question for many of us in the sector is whether the UK government should include them as part of the lower ODA target announced last year. Doing so is a choice. By insisting that anything that can be reported as ODA must be counted under the 0.5% target, the government has created the conditions that will mean further cuts to the UK’s aid programmes because counting one thing (excess vaccine doses or SDRs for example) means less money is available for other things (girls education programmes, humanitarian responses or climate change).
Using SDRs and donating excess vaccine doses to help people living in low and middle income countries would cost the UK next to nothing. In the case of excess vaccine doses, countries like the UK are being rewarded for helping to ‘solve’ the problem of there not being enough vaccines in lower and middle income countries, but it’s their vaccine hoarding behaviour that has contributed to this problem. Likewise, forgiving Sudan’s inflated debt comes at no real cost to the UK. Exploiting the letter of the DAC rules on ODA to introduce further aid cuts when the government has already decimated the aid budget is the wrong choice.
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It means less money available for countries in the UK aid budget. The 100 million additional vaccine doses the UK has pledged to donate to lower income countries for 2021 and 2022 are estimated to be worth around £490 million for and this looks set to come out of the UK’s aid budget. That’s more than the amount currently budgeted by the FCDO for climate programmes (£214 million) and humanitarian response (£277 million) in this financial year. Debt relief for Sudan, from debt incurred decades ago and made up largely of interest charges, will eat up another £860 million over the next two years.
This funding could instead be used to reverse the cuts to programmes in the MENA region for two years (£384 million per year) and still leave £100 million. We don’t currently know how much of the UK’s £20 billion SDR allocation will be rechanneled, but unless the government commits to making any allocations additional to the 0.5% target, more lifesaving and life changing programmes will need to be cut.
Why it matters
How the UK reaches its ODA target is just as important as what that target is. We need to ensure that in pushing for ODA to be protected and prioritised, we are not just pushing for the amount but also for the how its spent and what is spent on. With a reduced budget, we need to question whether the long-term trend of ODA increasingly being spent in ways that don’t necessarily benefit the most marginalised people is the right use of a finite budget. An example of the questionable use of ODA is covering in-house refugee costs at the Home Office or using it in ways that increase LMIC debt burden (which will almost certainly be the case for SDRs).
In the wake of 18 months of devastating cuts to those most vulnerable, it is unconscionable that the UK government is considering using ‘free money’ intended to help the world’s poorest to save themselves money instead. And, in the case of SDRs, they are likely to be the only donor to report re-channelling as ODA. There is still time for this government to do the right thing and protect what remains of the diminishing aid budget from ‘fake’ spending that exists only on the Treasury’s balance sheets. The UK should commit to counting new resources like SDRs, excess vaccine doses and Sudan debt relief as truly additional to the UK aid budget, rather than allowing the Treasury to continue its raid.