Spending Review: Aid is key to fairness, reform and growth

This week’s Comprehensive Spending Review heralds a long and painful process of fiscal reform and austerity. In this context, the protection of international development spending and the commitment to spend 0.7% of national income on international development by 2013 are bold decisions. The UK government should take credit for sticking by its pre-election promises in the face of significant opposition.

Save the Children believes that continuing to provide aid to the poorest countries is not only the right thing to do, but is also in the UK’s long term interest. ‘Smart aid’ is an investment in all of our futures and can build a more prosperous and stable world. Aid represents one penny in every pound of public spending, and the increase pledged by the Chancellor is just two weeks of NHS spending. The question is less whether we can afford our aid commitments, but whether we can afford not to meet them. The coalition government talked about themes of fairness, reform and growth this week as underpinning the CSR. If the aid increase is spent well it could be a catalyst for progress on all these three fronts:

Fairness: The government’s aid commitment upholds the commitment that the economic crisis, which started in the developed world but which has had major impacts on the developing world, would not be borne out on the backs of the world’s poorest people. The World Bank estimates that 64 million more people are in poverty around the world as a result of the economic downturn. These people did not contribute to the crisis. There’s little dispute that the UK financial sector and the government’s regulatory choices did contribute. Fairness demands that the UK redoubles its efforts at this time, rather than scales them back.

Reform: The CSR is coinciding with a far-reaching review of UK aid — bilateral, multilateral and humanitarian aid is being scrutinised in a series of reviews (view the SCUK submissions).  Used well, the aid reviews could signal a shift in priorities, and lead to a stronger focus on the impact on poverty. This implies spending aid where the need is greatest and there’s an ability to use it well.

There is a concern that the increasing focus on a handful of geopolitically important aid recipients, such as Afghanistan and Pakistan, risks a reduction in aid for other conflict-affected and fragile states (think Haiti) that are lesser priorities for the Foreign & Commonwealth Office. It could also mean less aid for poor but stable countries in Africa. The challenge for the government will be to take a balanced approach to aid, which reflects the fact that conflict is a major driver of poverty, but also doesn’t punish good performers. 

Growth: Investing in the developing world is not only a matter of altruism or safeguarding human rights. It makes economic sense. Building up the economies and human capital of developing countries will, in the long-term, facilitate greater shared prosperity. Improving human development outcomes is also important for political stability and a steady global trading environment.

The CSR announced an investment in green growth. These principles also need applying more consistently to UK aid. The commitment to climate change (£2.9bn) over the next 4 years includes the £1.5bn already committed to Fast-Start Finance in 2010. This leaves only £1.4bn for the next three years of the CSR. The Stern Review calculates that inadequate action now could cost the up to 20% of global GDP each year in the long run. As the vulnerability of people in developing countries to climate change increases, up front investment can only bring positive economic returns.

We will continue to monitor the implementation of the CSR aid pledge over the coming 4 years: the government figures show aid staying at 0.56% of national income for the first two years, and then suddenly increasing to 0.7% for 2013 and 2014. It’s not clear how plausible the assumptions are behind this hike in spending (debt relief looks to be part of the calculations), and a sudden spurt in disbursements make the aid harder to spend well.