Foreign Aid FAQs – #10 “Aid money is spent on the wrong things”

There is a widespread belief that overseas aid money is either handed over to corrupt dictators and never reaches the people it is supposed to help, or is wasted on extraordinarily expensive projects which have little or no benefit for people living in poverty. These are perfectly understandable concerns – all public spending should be scrutinised and accountable to ensure that taxpayers are getting the best possible value for money. But do these accusations hold up?

During an episode of Question Time this January, the UKIP donor Arron banks declared that ‘We have to start working out our priorities. Is it to spend £12 billion [in foreign aid] that is misappropriated by foreign corrupt governments or spend the money on the NHS for people in this country?’[1] Firstly, the idea that we should cut foreign aid in order to pay for public services is tackled in this article. Secondly, the claim that the entirety of the UK’s aid budget ends up in the pockets of foreign governments is simply untrue.

The first thing to understand is how the foreign aid budget is actually spent. The vast majority of the aid budget is not given to foreign governments. In fact, the Department for International Development has committed to ending traditional ‘budget support’ – money given directly to developing country governments.[2] The proportion of the aid budget spent this way has been steadily declining, and in 2014 accounted for just 0.45% of the total aid spend.[3]

Around 40% of the aid budget goes to multilateral organisations – bodies such as UNICEF which bring together various governments, individuals, corporations, and foundations to act collectively.[4] This has both pros and cons. Multilateral organisations have economies of scale, world-class specialist expertise and a large reach, and are also widely seen as independent and politically impartial. However, sending money to multilateral organisations can reduce the oversight which the UK government has over exactly how that money is spent.

The other 60% is spent on direct assistance to developing countries. As seen above, only a very small (and falling) proportion of this is simply handed over to foreign governments to do what they like with. The vast majority is used to fund specific projects which the UK government maintains oversight of, and in fact the Department for International Development is one of the most transparent aid agencies in the world.[5] The bulk of this money is channelled through international development charities which work directly with local communities in developing countries, meaning that their governments don’t get a chance to misappropriate the funds.[6]

By all means let’s have a discussion about how to end corruption around the world. For example, a good start would be closing down tax havens which allow corrupt leaders to hide their ill-gotten gains. But lazily repeating the falsehood that aid spending first and foremost goes to corrupt foreign leaders is both dishonest and unhelpful.

The problems with aid

Overseas aid has achieved incredible things (see this article for some examples), but of course it is not perfect. Examples abound of money from the aid budget not being spent on the most impactful projects, to say the least. For instance, the infamous example of £3.8 million being used to fund the Ethiopian ‘Spice Girls’.[8] An increasing amount of aid money is not even leaving the UK, but is being spent on expensive consultants. The Times newspaper claimed that up to £1 billion a year from the foreign aid budget was spent this way, with one consultant reportedly paid £23,000 to write a 2-page policy brief.[9]

Furthermore, too often the primary purpose of aid has not been poverty reduction, but it has instead been used to secure policy concessions (e.g. preferential trade deals, military support, privatisation of public utilities).[10] Of course, if aid is to contribute to a world free of poverty, this needs to end.

The public debate around foreign aid has been reduced to an uncritical ‘for’ camp and an irredeemably negative ‘against’ camp. Against this backdrop, it’s tempting to gloss over the failings of foreign aid when coming to its defence. However, we won’t build public support for aid by pedalling rose-tinted untruths.

It is perfectly possible to be critical of how the aid budget is spent while still supporting it in principle. If millions of pounds from the health budget were found to have been misspent, this would prompt calls for reform rather than for health spending to be scrapped. Those of us who believe that foreign aid is a good use of public money must put forward a positive vision of what the aid budget should be spent on, rather than uncritically defending it in its current state. Global Justice Now have done some excellent work in this area, releasing the report Re-Imagining UK Aid which sets out such a vision.

The foreign aid budget is not perfect, so let’s reform it. It’s time to move the public debate away from straw-man arguments and oversimplifications and towards a more nuanced discussion around the areas in which foreign aid is failing and the ways it can be improved.

[1] www.insuranceage.co.uk/insurance-age/opinion/2480294/blog-arron-banks-question-time-appearance
[2] www.gov.uk/government/uploads/system/uploads/attachment_data/file/573889/Bilateral-Development-Review-2016.pdf, p. 49
[3] www.gov.uk/government/uploads/system/uploads/attachment_data/file/538878/annual-report-accounts-201516a.pdf, pp. 149, 153
[4] www.theweek.co.uk/63394/how-is-the-12bn-foreign-aid-budget-spent
[5] www.gov.uk/government/news/media-reports-on-uk-aid-projects-setting-the-record-straight
[6] www.theguardian.com/global-development/2013/mar/20/uk-aid-spend-important-works
[7] www.gov.uk/government/uploads/system/uploads/attachment_data/file/573889/Bilateral-Development-Review-2016.pdf, p. 25
[8] www.telegraph.co.uk/news/politics/11228152/The-bizarre-recipients-of-British-foreign-aid.html
[9] www.theweek.co.uk/63394/how-is-the-12bn-foreign-aid-budget-spent
[10] Bruce Bueno de Mesquita and Alastair Smith, The Dictator’s Handbook, ch. 7


The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.

***

Have an opinion on this or another topic? Why not write for our blog? Click here to find out more and get in touch.