UK must avoid wasting money in rush to meet aid targets, say MPs

31 Jan 13
The UK’s efforts to meet its development aid goals are risking value for money, MPs warned today.

A report on the Department for International Development’s 2011/12 accounts found that £450m of spending planned for 2012 had been moved to 2011 to meet the aid target for that year.

The department also increased the value of payments on other projects by £130m to enable it to meet its goal for the year, according to the Commons international development select committee.

The DFID’s budget is due for its largest raise to date this year as the government bids to increase its aid spending from 0.56% of gross national income to 0.7%. But the MPs found that it faced a ‘major challenge’ in spending this increase cost-effectively when it was cutting administration costs.

Committee chair Sir Malcolm Bruce said: ‘We are worried that pressure to meet targets to increase overseas development aid could lead to DFID making poor spending decisions.

He added: ‘The department should be prepared to miss aid targets where there are delays or cancellations to its planned projects and it does not have good value alternatives.’

MPs also highlighted the department’s increased reliance on multilateral organisations to channel aid spending. Almost two-thirds of aid spent in 2011/12 went through multilateral bodies, continuing the ‘major change’ in recent years that has seen the DFID reduce direct aid to recipient country’s governments.

‘DFID argues that the change is not a reflection of its need to spend money quickly, but a result of the reduced need for budget support in countries with rising tax bases and improved financial management, as well as its focus on fragile states,’ they noted.

But they warned that multilaterals had high costs and ‘too often limited effectiveness’ and said the department should instead explore greater use of local non-governmental organisations and budget support for specific sectors.

A DFID spokesman stressed that the department’s 2011 Multilateral Aid Review had given, for the first time, a ‘rigorous assessment’ of the value for money it received from multilateral agencies, with funding stopped for poor performance.

‘We agree with the IDC that we must continue to assess multilaterals for efficiency which is why we are reviewing all our multilateral agencies’ performance this year,’ he added.

In their report, MPs were critical of the DFID’s ‘contradictory’ approach towards aid for middle-income countries, noting that while it was planning to end grant aid to India in 2015, spending in Nigeria and Pakistan was due to grow ‘rapidly’.

‘As expenditure on middle-income countries increases, it is even more important that decision-making is rational and consistent. We recommend that the department establish and make public the criteria it will use to inform decisions of when and how it should cease to provide aid,’ they said.

They did, however, welcome the rapid increase in professional advisers employed by the DFID and the increased proportion of its staff working overseas. But they still had concerns about whether there were enough staff with the right skills to oversee how UK aid was spent by multilaterals.

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