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Making the case for overseas aid

June 24, 2011

Making the case for overseas aid Few Tory MPs attending constituency events nowadays avoid being buttonholed – often by the most Conservative-minded person present – and harangued about the government’s stance on overseas aid. Not so long ago we were typically being swamped by campaign emails imploring government to commit 0.7% of GDP to overseas aid. These days the usual line is:

I am appalled that the government is increasing the aid budget while cutting elsewhere. Why are we giving money to the likes of India, which has a space programme, and African countries, where the fruits of hardworking British taxpayers are siphoned off by corrupt regimes? Please remind the Prime Minister that charity begins at home.

There are pure, altruistic, as well as slightly more cynical PR reasons why our Party committed itself to fulfilling the 0.7% pledge. Modern Conservatives would match economic diligence with a social conscience. Fast forward to mid-2011, however, and our aid promise is under intense scrutiny. For sure, to neglect it would have left the new government vulnerable to accusations of heartlessness. However, rather than being proud of the government’s stance, a number of my constituents regard it as symptomatic of an administration out of step with the needs of ordinary people which misuses taxpayers’ money to parade its compassion on the global stage.

Assuming that our policy on aid is not ripe for a u-turn, we shall have to do a far better job of selling it to an increasingly cynical public. During an era when UK defence expenditure, and with it our projection of ‘hard power’, has been in inexorable decline, we should recognise that our taking a lead in provision of overseas aid will bring the nation real ‘soft power’ benefits. We stand to increase our clout in the developing world and make real diplomatic and economic advances.

However, I appreciate that aid scepticism is not just borne of our current financial predicament. For decades now, through their taxes and charitable giving, Britons have paid vast sums to help developing countries. Many have even spent time in those countries working on aid projects. Yet all too often progress has appeared negligible. While the Far East and South Asia powers to economic dominance, sub-Saharan Africa has stalled despite the billions of international aid injected there.

For aid to succeed requires stable political and economic institutions in recipient countries. It is clear that in much of Africa over the past forty years or more this prerequisite has been absent. By contrast there has been a Faustian bargain promising stability rather than critical economic reform between donors (NGOs, charities and Western governments alike) and heads of African States who have become increasingly corrupted by the vast sums of aid at stake. People understandably now ask – is aid working, does it deliver value for money and do we donate more to salve our consciences than to deliver real change on the ground? Worse still, might aid actually be hampering the progress of developing countries?

The Department for International Development (DFID) needs to show that taxpayers’ money is being channelled to effective projects and that our people overseas work vigorously to reduce the flaws in existing programmes.

Second, it would be helpful if we were to communicate a broader range of benefits that come from our work abroad. In a globalised world, governments recognise that not all policy solutions can be found at home. To prevent crime, to curb new waves of immigration, to stop the spread of disease, our efforts can be made more effective by concentrating on the source of an issue. Hunger relief and health programmes may be laudable in their own right, but British people want to understand how DFID money benefits them personally. We might also communicate how strengthening our ties with developing countries can be of huge benefit in terms of our trade, energy and security interests.

Third, we should make clear that our eventual goal is to see aid stopped altogether. Taxpayers would be right to consider the ultimate mark of a successful development policy as being the elimination of aid. Yet I am not sure I have ever heard such an aim uttered – indeed I fear the number of people now working in the aid business is so huge that we have inadvertently created a vested interest in sustaining the flow.

The truth is that the expansion of free markets has done more to pull people out of poverty than all of the world’s aid programmes multiplied many times over. One of the key pervading forces of free trade is the ability of nations to be able to exploit their comparative advantage in producing certain goods. However, while nations of the developed world typically have a wide variety of products to export, developing countries often have few to offer and these usually take the form of natural resources or agricultural goods.

Protectionist trade barriers rob these developing nations of one of the only goods in which they have a comparative advantage in several different ways. Take the EU’s Common Agricultural Policy. First, the EU insists on producing these goods at a higher cost rather than importing them at the much lower free market price by engaging in trade diversion rather than creation. Second, the EU robs developing nations from access to its markets, the largest in the world. Finally, extremely cheap EU goods destroy local and world businesses since the farmers of poorer nations cannot compete with the subsidised agricultural goods from the richer EU. There is a strong psychological desire in mainland Europe since the foundation of the EEC for plentiful supplies of home-grown food. Likewise there is a clear desire in Britain to preserve our countryside and agricultural sector. However, we should find alternative ways of delivering these goals that do not skew the market – and be at the forefront of exposing the highly damaging effects that the CAP has on trade policy with the developing world. Naturally, the same principles apply to the highly subsidised US agriculture sector.

Similarly, despite the debilitating effects of the financial crisis on the developed world, broadly I believe the growth of financial institutions has been crucial in spreading wealth across the globe. The most pronounced poverty continues apace in those communities entirely excluded from the financial system. In microfinance (the provision of financial services such as small loans or savings accounts to low income clients), DFID has a form of aid that has more chance than most of becoming self-sustaining and long lasting, echoing the themes of responsibility and independence that will become ever more important as our own nation negotiates the tough economic years ahead.

At a more elevated level, I believe we should encourage recipient governments to seek alternative sources of financing to reduce aid dependence. Top of the list should be Foreign Direct Investment (FDI). There are currently too many hurdles in place that would otherwise make sub-Saharan Africa an attractive place for private investment. Regulatory and legal systems need to be made more reliable, property rights honoured, infrastructure improved, tax systems streamlined. The UK has the expertise to help with those reforms.

Finally, closer to home sceptical taxpayers need to be aware of the fast changing reality in Africa as a result of China’s increasing influence. The Chinese are investing huge sums on that continent. Their might is spreading accordingly and this may make old strategies of engaging with developing nations moribund. I am not suggesting a battle for influence on the African continent akin to that which occurred two centuries ago or during the Cold War. In truth today it would be a battle in which we could not compete! But our development budget can be used as a tool to project our values. For example, if the Foreign Office budget struggles to sustain an influential BBC World Service, hitherto one of the UK’s most high quality international assets providing us with invaluable soft power, we might consider whether it could be brought under DFID’s umbrella.

DFID is already doing many of the things I have suggested. But I fear the government is losing the marketing battle. The British public finds it condescending to be lectured about the moral imperative of giving aid by an intellectual elite. People are not hardhearted but they rightly demand that taxpayers’ money is used wisely and delivers direct value to Britain as well, particularly in lean times. The case can be made but it requires the government to confront scepticism with evidence, not sanctimonious preaching.