Taken at face value, recent ministerial pronouncements suggest that the UK aid programme is being repurposed to forge new trading partnerships and seize the economic opportunities open to Britain in a post-Brexit world.
New International Development Secretary Alok Sharma led his first African trip with the message: “UK aid is helping to generate trade and investment opportunities – both for African and British businesses.” His predecessor, Penny Mordaunt, committed DFID to developing a “bold new Brexit-ready proposition to boost trade and investment with developing countries”. Theresa May had declared herself “unashamed” about ensuring that the aid programme works for the UK.
A new ICAI Information Note published this week explores the reality behind this rhetoric – how much has really changed in the way UK aid is spent, and which departments have seized the mutual prosperity baton in the intense cross-Whitehall race for £14 billion in UK aid.
The ICAI note suggests that departments are, for the time being, struggling to keep up with ministerial ambitions. There is no way of measuring how much aid is going towards mutual prosperity (the term is undefined and ambiguous), but the sums do not appear high. There is a joint DFID-Department for International Trade (DIT) Trade for Development team with a portfolio of £93 million in programmes extending to 2023. DFID is developing its ‘market building’ offer, including in new countries such as Senegal and Madagascar, but does not directly promote UK commercial interests. Even the Prosperity Fund, which has the most explicit mutual prosperity mandate, is taking a fairly conservative approach. The objectives of its programmes – such as better business environments, less corruption and improved skills – are conventional, even if the target countries and sectors are chosen with a view to creating long-term opportunities for UK business.
One of the main concerns raised by the mutual prosperity agenda is whether it is consistent with the requirements of the International Development Act and the UK’s commitment to untied aid. ICAI found that the departments are being careful to meet these obligations. In fact, ICAI’s concerns about the renewed tying of UK aid have come from the large research funds, rather than mutual prosperity programming.
Yet the profile of UK aid is changing fast, and the ICAI note flags some serious issues that will need to be resolved.
First, there are concerns that the allocative choices made in the coming period will be less pro-poor. Most non-DFID aid already goes to middle-income countries, and the largest beneficiaries of the Prosperity Fund will be emerging economic powers like Brazil, China, India and Mexico. With UK aid dispersed across 14 departments and counting, nobody is responsible for deciding on the overall geographical footprint. Within countries, there are risks that the UK might start to trade off development impact for benefits to the UK – for example, by choosing to work in sectors or areas that are less important for poverty reduction but offer more opportunities for UK businesses.
Second, we don’t know the new rules of the game. The law says that UK aid must be likely to contribute to poverty reduction, but can it simultaneously be used to help out British investors in developing countries? What if those investors are lobbying for tax breaks, at the same time as UK aid is trying to help the partner country to strengthen tax collection? In the drive for joined-up working under the Fusion Doctrine, there is no sign that aid-spending departments have even begun to think through the conflicts of interest that may arise.
Third, there are concerns around how aid-spending officials spend their time. DFID staff are being asked to contribute their expertise and country knowledge to the development of cross-government mutual prosperity strategies. The opportunity cost of these efforts is working with national counterparts on poverty reduction.
Finally, in trying to ride two horses, there is a risk that UK aid ends up riding neither particularly well. In its quest to combine primary, poverty-reducing objectives with secondary benefits for UK business, the Prosperity Fund has come up with a series of large technical assistance (TA) programmes designed to improve trade and investment policy in countries of economic interest to the UK. The record of TA in these areas is not particularly strong – particularly not in large middle-income countries with ample technical capacity of their own. The challenges facing these countries are unlikely to be straightforward capacity gaps, but gnarly political economy problems that are difficult for outsiders to understand, let alone resolve.
There is not much information in the public domain about how exactly Prosperity Fund programmes operate. It’s a stretch to imagine that they can influence trade and investment policy in India or Brazil enough to affect national poverty outcomes. But equally, it’s a stretch to imagine them achieving results significant enough to affect bilateral trade. The risk is not just that they privilege UK interests over development results, but that they fail to make headway with either.
Yet for all these reservations, the mutual prosperity agenda is also a response to a changing global context. As more developing countries pass the middle-income threshold, they are looking for a more mature and sustainable development partnership, where the mutual interest is open and declared. And as they gain access to more sources of development finance, the role of ODA is changing – away from buying development results directly, towards mobilising and influencing other financial flows. With its creativity, technical knowhow and ability to scale up successful initiatives, the private sector will be an indispensable partner to achieving the SDGs and the Paris climate agreement.
Furthermore, as the ICAI note points out, the UK is not alone in taking this direction. The Netherlands is even more explicit about using aid to subsidise Dutch companies and promote the economic growth of the Netherlands. Donors such as the US and Japan have always had a strong eye to mutual benefit in their aid. In a world where China is using infrastructure finance to secure its economic and geo-strategic interests, it is inevitable that traditional donors will respond.
For the time being, the mutual prosperity agenda looks rather like an ideological label stuck on the UK aid programme to reconcile it with Brexit. Yet it is also part of adapting development assistance to a new era. Rather than wishing ourselves back in a golden age of purely poverty-focused aid – an era that existed, if at all, for only a short time – perhaps we need to think harder about how to do mutual prosperity well. Sticking a UK national interest label on a programme shouldn’t exempt it from the need to be evidence-based and results-focused. Nor does it change the fundamentals of what constitutes good development practice.
We will return to the question of how to think about mutual prosperity in UK aid in a more strategic way in a forthcoming blog.
Agulhas conducts reviews and evaluations on behalf of ICAI.