Why the UK held the line on aid spending, despite the recession

April 23, 2009

     By Duncan Green     

Apologies for a bit of British parochialism, but this story has wider ramifications. A combination of political leadership and grassroots activism scored a real victory for the UK aid budget yesterday. Here’s why.

All the headlines on Wednesday’s budget statement by Chancellor of the Exchequer (Finance Minister) Alistair Darling were about the dire state of UK finances, and the extreme pressure building on public spending. Amazing then, that buried in the gloomy analysis was an important victory – the UK decided against cutting aid despite the recession. That decision meant that £700 million that had been under threat will now be spent on aid. 

The background is that rich countries at the Gleneagles G8 summit in 2005 made a promise to increase aid by $50 billion dollars by 2010. However, these promises were expressed as a proportion of Gross National Income (GNI), notably the European promise that all EU member states would reach 0.51% of GNI by 2010.  The UK promised slightly more, (0.56), which at the time was predicted to reach around £9.1 billion by 2010.  But rich country economies are now rapidly shrinking, so a given % of GNI is worth less in real terms – Oxfam has calculated that the $50 billion promise of 2005 will look more like $41 billion post-recession.

This presented the fiscal hawks in the UK government with a tempting prospect; save approximately £700 million whilst sticking to its public promise of raising aid to 0.56% of GNI by 2010.  All the indications were that this was a very serious possibility with strong voices inside government in favour right up until the last minute. Instead, Gordon Brown intervened to insist that the UK would stick to the overall cash figure of £9.1 billion, an increase (in terms of GNI) to 0.6% in 2010/11. Holding the line in this way was real leadership by a Prime Minister under extreme financial pressure, but his backbone was stiffened by aid campaigners, including Oxfam (I try not to blow our trumpet too much, but I think this one is merited). They deluged the Chancellor and Prime Minister with faxes, and lobbied their MPs across the country to show them that aid remains important to public opinion even in the teeth of a recession.
This is not only good news in itself, but sends out a clear signal to other G8 nations ahead of the G8 summit in Italy in July. There, the Italian government faces some torrid questions about its dismal performance on aid, where it is busy implementing cuts to an already paltry and low quality aid budget, (the third lowest after the US and Japan at 0.2% % of GNI).

P.S. Owen Barder thinks the Chancellor didn’t go far enough, but he (Owen, not the Chancellor) lives in Ethiopia – if you’re stuck in the middle of the British economic meltdown, holding the line in this way looks pretty amazing.

April 23, 2009
Duncan Green