What’s the likely impact of Brexit on development, aid and Oxfam? Any opportunities amid the gloom?

June 30, 2016

     By Duncan Green     

Following on Tuesday’s retrospective ‘how did this happen?’ piece, some thoughts on the future, starting

So does 'crisis ' really equal 'danger' + 'opportunity'?

So does ‘crisis ‘ really equal ‘danger’ + ‘opportunity’?

wide (development in general) then narrowing down to the aid business, and all the way to Oxfam/INGOs. All highly tentative, subject to correction etc in the coming days. One big assumption: I’m assuming that Brexit actually goes ahead. And one pleasant surprise – there are a few opportunities as well as a lot of risks in the post-Brexit confusion.

Development, output and trade: Unless you are an extreme anti-capitalist, it’s hard to see an upside in $3 trillion dollars being wiped off global markets in the two days after the vote, or the coming years of uncertainty and instability in the UK, with plenty of potential for contagion to the EU (a great unravelling?) and beyond. See briefing from ODI’s Phyllis Papadavid for more.

The implications for the trading system are messy. A Brexit UK will presumably have to negotiate both a spate of bilateral trade deals to replace EU-led ones such as the Economic Partnership Agreements with Europe’s former colonies, and entry to the WTO as an independent player (it’s been represented by the EU up to now). More from Owen Barder on the implications for the UK’s trading partners in Africa and elsewhere.

the view from Germany

the view from Germany

Aid: At first sight, this looks like big trouble for 0.7 – many of the Leavers are just as hostile to internationalism and aid as they are to the EU. A Brexit government is likely to find itself in urgent need of cash, so overturning Britain’s legal commitment to 0.7 would look like like an easy target. That’s certainly Owen’s view. So I was surprised (and reassured) by the more optimistic analysis by Oxfam’s political liaison guy, Tim Livesey. He argues convincingly that any Brexit government will be keen to show that Britain is not turning its back on the world. The legal commitment to 0.7 means that any attempt to cut aid would require a high profile decision in parliament, where a recent debate showed just how much support for aid exists, despite the best efforts of the Daily Mail. Of the two front runners to succeed David Cameron, Boris Johnson is a cosmopolitan internationalist, while Teresa May is famous for telling the Tories to shed their image as ‘the nasty party’. For Party read nasty Country – Britain’s reputation has been deeply damaged by Brexit, and its aid programme could help restore it.

A lot of UK aid currently goes through the EU, and that would become purely bilateral UK aid after a Brexit. That could give opportunities for DFID to do more in the way of innovation and accountability (although on the other hand, if DFID chooses to do bad or dumb stuff, it will have more money to do it with).

But in at least two other areas, Brexit is just plain bad news. At the time of writing, Brexit has devalued I wish we hadn't done that nowthe pound by over 10%, massively cutting the real value of British aid. Second, the entire British political machine will be consumed for years by Brexit negotiations, so you can kiss goodbye to a lot of British leadership on everything from nutrition to women’s rights, although DFID’s global role will hopefully continue, as Brexit talks drag on in Brussels.

The British aid business: Will the anomalously dynamic UK aid cluster survive? It will have a series of blows to its funding (eg European research grants will become harder to access), bandwidth in Whitehall will shrink, and in any case, Britain’s international voice will be diminished in Brussels and beyond.

Oxfam/other UK based INGOs: There are already serious financial consequences from the drop in the value of the pound – Oxfam may need to dig into its reserves to minimise the damage to its partners. The future contains further risks: a post-Brexit recession in the UK would inevitably hit our ability to raise funds from the public. Whether or not we can continue to access EU funding (currently 10% of Oxfam GB’s income) depends on the nature of the Brexit deal – eg whether the UK remains a member of the European Economic Area, and/or strikes a bilateral deal like Switzerland. That will take several years, but obviously includes a worst case scenario (Oxit? Sorry, couldn’t help myself…..), consisting of a double whammy in which DFID is butchered, at the same time as we lose access to at least a part of EU funds. There are lots of reasons to think that won’t happen, but these are sombre times.

There are wider considerations and big strategic choices to be made on how to respond. Here are a
couple that cropped up in a staff discussion this week.

Short term v long term: in the short term, there will be a spate of negotiations, new trade deals, Brexit talks with the EU etc, all of which could have profound impacts on development. There is a clear case for stepping up  efforts to influence the UK Government in order to seize any opportunities and minimize damage.

On the other hand Brexit has revealed just how deep Britain’s divide is, a multifaceted inequality that has Brexit thumbs upgenerated not just income inequality but deep divisions over norms and identity. Would it be better to pull back from the day to day trench warfare of Whitehall and go long term, working with youth, investing more in development education, working on public attitudes to race and ‘Otherness’?

More UK or Less? There is another option. If the decline in Britain’s influence is now terminal and accelerating, maybe UK NGOs should shift their emphasis to the countries that matter more, helping build citizenship and voice in the emerging powers, strengthening the pan-EU network on development?

OK, that’s about as much straw clutchism as I can muster. As ever, I welcome all comments and insights from the multiple conversations that must be going on right now

June 30, 2016
Duncan Green