Development Aid Budget

Baroness D'Souza Excerpts

Monday 3rd July 2017 Lords Chamber

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[Baroness D'Souza]

That this House takes note of the case for measuring the impact of the United Kingdom’s development aid budget.

[Baroness D'Souza (CB)]

My Lords, development aid is a subject of much discussion, debate and starkly different opinions. For example, it is said that development aid is good and necessary, but we should not have a mandatory annual budget; money, after all, could be misused in order to meet targets. It is said that development aid is good and necessary and a mandatory annual budget allows proper longer-term planning, and that it achieves economic growth, albeit in modest terms, while others assert that aid has had no positive effect on growth. There is a further important division on development aid itself—that which is carried out by experts exported to a developing country to run a programme, or that which funds a recipient country to develop the skills and capacities to carry out development programmes itself. The issue here is that none of these viewpoints can be wholly rejected or accepted unless we know more about the effectiveness of aid in the medium to long term, and this in turn requires clear objectives and evidence-based evaluation.

There has been no dearth of debate on this topic in both Houses. Briefly, the 1970 UN target of 0.7% of gross national income, amounting in the last financial year in the UK to £13.5 billion, was eventually achieved in the 2015 international development Act under the coalition Government. This put to an end a pattern of aid flows generously funded by one Government to be restricted by the next Administration, and so on. The Independent Commission for Aid Impact, or ICAI, was set up in 2011 to evaluate aid spending and its contribution to development results. Meanwhile, reports from the House of Commons International Development Committee, the All Party Parliamentary Group for Debt, Aid and Trade and the House of Lords Economic Affairs Select Committee in March 2012 all covered similar ground. But dissent continued. Last November, the Private Member’s Bill proposed by the noble Lord, Lord Lipsey, aimed to amend the annual expenditure of £13 billion to a five-year cycle to enable some rollover and avoid unplanned project overspend at the end of each financial year. One view is that a predetermined, and indeed statutory, aid budget may lead to uncontrolled spending and a distortion of genuine and lasting development, another that the amount spent is less important than the result achieved. While it is always easier to demonstrate failure rather than success, the literature is not filled with examples of wasted aid, but nor is it heavy with proper methodological impact surveys.

More specific conclusions on UK development aid overall include that the Department for International Development emerges as a worldwide-respected and effective aid agent; economic growth is the essential ingredient for reducing poverty; there should be greater clarity on the aim of aid programmes; and, while aid is not the main driver of growth, it can and does play a catalytic role.

Development aid, formally defined as financial aid,

“given by governments to support the economic, environmental, social and political development of developing countries”,

is a multibillion dollar business, which is changing, and we would do well to understand better what the longer-term implications are. I hope that this debate is not so much about aid spending but more concerned with the need to develop models that assess impact and, to paraphrase the noble Lord, Lord Judd, to ask how much aid adds to the creation of world justice, peace and stability.

A significant factor is the growing acceptance that giving aid is very tricky to accomplish, and even trickier to evaluate. It is difficult to make ambitious, large-scale aid work and especially difficult to improve the lot of the very poor. This is exacerbated by the fact that the goals of major aid programmes are often very different and sometimes inadequately articulated. These can range from reducing the incidence and prevalence of water-borne diseases, through increasing the income of a significant sector of the population to streamlining tax collection. The larger and more ambitious the development programme the more difficult it is to judge the outcomes, whereas focused and contained programmes that incorporate capacity building have effective long-term benefits, as is the case, for example, with immunisation programmes. However, the nature of aid is changing: budgets grow larger while, at the same time, there is reduced administrative support. I asked the Department for International Development to consider giving a grant to a school in Afghanistan, which would have met all DfID’s objectives, and was asked: “Can you handle £10 million”? Well no, certainly not, but the inference was that it was not cost effective for that department to manage small grants.

There has also been a massive increase in private sector delivery, which has advantages and disadvantages. The older model of development assistance—a form of so-called soft power—has been based on the gradual building of enduring individual and institutional relationships with officials, government and otherwise, in the countries concerned and a resulting trust and joint ownership of outcomes. Working at country level, DfID has always been especially good at this extension of its political and diplomatic influence. A study by the Institute of Development Studies pointed out that effective aid requires as much investment in relationships as in managing money. The need for neat results often ignores the reality that effective aid is too often untidy and even messy.

However, private sector delivery is less committed to oversight of aid programmes, and the multiplicity of freelance experts, subcontractors, and commercially confidential information makes impact evaluation virtually impossible, while longer-term evaluation may not be in the interests of the private contractor. It certainly limits knowledge of local cultures, and therefore the likely outcomes, of a major aid programme. The move towards technical assistance also reflects the changing nature of aid. Technical assistance, such as help in setting up insurance schemes to help farmers when crops fail, is best delivered by the private sector which advises and runs such schemes. Yet again, although there will be excessive scrutiny of planned and actual expenditure—down to the last bus ticket in many cases—there is far less, if any, scrutiny of the impact of these schemes, which are usually expensive and less amenable to detailed examination. The growth of a whole industry of private sector companies which exist solely to win development assistance contracts is alarming. Following the earthquake in Haiti, some $6 billion of aid was allocated to a country of 10 million people. Some 70% of the aid was delivered through private contractors and, as we know, the outcomes, or lack of them—notably the devastating cholera epidemic—are a continuing source of anger among the Haitian population.

Capital flows and trade far outweigh development aid, and the use of public money to incentivise private investment is fine and acceptable. However, this makes it far harder to assess how well money is spent, and aid delivered via other departments is harder to track. Despite these difficulties, it is nevertheless imperative that we do so. Since development deals with people, much cannot be reliably predicted, and all these variables make it extremely difficult to evaluate anything but the “simple” achievement of modest goals in proper time: that money has been spent roughly in accordance with the protocols and broadly within the timeframe set. Is this enough? Together with many others, I, think not and this is a legitimate question for the public to ask.

A search of the considerable literature reveals endless evaluation studies but very few long-term and reliable impact studies. A colleague cited an example which I think illustrates the kind of difficulties that arise: Lake Victoria Dam in Sri Lanka, a project conceived in 1978 and completed in 1985, aimed to provide hydroelectricity for a given population and thereby release them from the vagaries of fluctuating oil prices. Costs were astronomical but planned spin-offs included consistent irrigation for several thousand farmers downstream. After more than 30 years’ operation, it is clear that the power output estimates have consistently fallen far short of predicted levels and the irrigation catchment area has been significantly smaller than anticipated. Estimates of the irrigation plan did not take into account major factors such as the leakage or the evaporation rate of the reservoir, and there were adverse unintended consequences: an increase in the incidence of malaria in the below-dam population; poor water quality affecting lakeside settlements; and a failure to capitalise on other benefits such as fisheries and recreation facilities.

An evaluation funded by the UK concluded that the whole project would have benefited from more comprehensive planning and more extensive data at the outset, and:

“Short term and partial studies by consultants are neither a cost-effective nor a professionally adequate substitute”.


The evaluation report also concedes that proper studies would have required,

“a mass of hydrological, financial, agricultural, social and environmental data and computer models developed over a number of years”.

One could argue that the cost was unacceptable and that the spin-off benefits were unrealistic. Would it, for example, have been more cost-effective to put the money required for the dam on a money market, with a guaranteed return which would have paid for oil and provided a profit? But would it have been possible to predict the investment return rates over the course of the building of the dam, or the fluctuations in the price of oil? It is this unpredictability that tends to defeat long-term impact studies.

Systems are needed to justify projects and calculate the so-called return rates, but systems do not necessarily reveal everything and are liable to manipulation. We do not as yet have sufficiently sophisticated mechanisms to measure outcomes, but this does not mean that we should abandon the focus on impact. A well-informed, plausible narrative by reasonable people of good will based on statements from project recipients—so called self-reported impact—is not to be sniffed at. Distrust arises when there are discrepancies between what is claimed and what little evidence is produced. For example, ICAI reviewed cash transfer programmes and pronounced them significant in reducing poverty and vulnerability and,

“presented a strong value for money case”.

Many of these cash transfers took the form of microcredit and microfinance schemes, but the large literature on access to finance, especially by women, shows it to have a very poor record. One respectable study even went so far as to say that many of these projects were counterproductive in the longer term in that they built up unsustainable debt and, in some cases, reinforced the gender inequalities already present in the society.

The mantra “aid works” repeated by the aid agencies is a bit like saying Brexit is Brexit. Of course aid works. The question is how well does it work, and whether,

“you might have to wait for your grandchildren to tell you”.—[Official Report, 18/11/16; col. 1668.],

according to the noble Viscount, Lord Eccles, when questioning DfID aid channelled through the Asian Development Bank. Does the bald fact that 166,000 households out of several million were supplied with water tell you as much as you need to know? How much did it cost? How well is the water flowing? What are the maintenance costs? Are maintenance skills being taught? What is the consequent reduction in disease?

Does it matter? Should we spend even more millions on monitoring and evaluation reports and yet more consultants winging their way to underdeveloped countries? One can define good aid as the art of spending modest amounts over long periods in careful co-ordination with recipient Governments, in step with the ability to meet recurrent costs. On the whole, aid is benevolent and beneficial, but we need to dig deeper. “Bad” aid is bad for communities for many reasons, some of which are: it can preserve the status quo and release Governments from undertaking reform and development; it can create further divisions between the poor and the not so poor; it may protect corrupt Governments—in one example, the revenues of a World Bank-funded oil production project were used to buy arms; it will result in repeated ill-conceived programmes; and it may promote expensive self-interest purchasing on the part of donor countries to the detriment of local industries in recipient countries.

In a democratic country such as the UK we should have utter transparency on major expenditure in our name, and question whether aid is used for political purposes. Understanding based on evidence as to why some interventions work and others do not in different communities is crucial to ensure that aid inputs achieve desired results, or at least do not make things worse. In conclusion, therefore, it does matter that the long-term impact of development aid is systematically assessed and published.

--- Later in debate ---

[Baroness D'Souza]

My Lords, I thank the Minister for his response, which was, as always, sympathetic, informative and detailed, and I warmly thank all noble Lords who contributed to the debate.

It is extremely encouraging that DfID is regarded so highly within this House and well beyond it, but there are areas which would benefit from greater scrutiny, particularly, clarification of the objectives and perhaps the strategy of aid itself and aid delivery. A particularly interesting idea is whether we can look further at the potential synergistic effect of bringing together the work of various government departments, the private sector and NGOs.

There are two very small points I want to make. First, many small research-based NGOs are doing some remarkable work on modelling and charting the development process rather than its impact and notably the evidence for development. As the noble Baroness, Lady Sheehan, said, it would be wonderful if they could receive some money to further the work they are doing.

Secondly, it is nearly 60 years since there has been a general debate on the basis for international aid. I wonder whether the UK is in a very good position to be able to lead an initiative to discuss what should be the basis for aid in the coming years.

Motion agreed.