EAC Report: Development Aid

Baroness Falkner of Margravine Excerpts

Monday 22nd October 2012 Lords Chamber

[Baroness Falkner of Margravine]

My Lords, I, too, thank the noble Lord, Lord MacGregor of Pulham Market, for the opportunity to speak about aid effectiveness. Some causes take on an aura of inevitability and become incontestable by their very nature. So it is with international aid for the Liberal Democrats. One of the things that drove me into political activism in the 1980s was the belief, articulated by the Liberals of the time, that we as a country needed to reach the UN target of 0.7% of GDP to alleviate poverty beyond our shores.

Liberal internationalism has always been one of the foundational values within this party and is virtually a part of its DNA. Therefore, the coalition agreement committing this Government to honouring the commitment given by all three parties to the 0.7% target was, and remains, an entirely valid and honourable promise to those who have the very least on this planet. However, to say that one believes in the moral imperative of alleviating hunger or sickness is not to say that one should be impervious to the evidence of what works. Moreover, a balance has to be struck between providing relief today and ensuring that relief is sustainable. The most powerful helping hand is one that lifts a person to his feet with sufficient strength that he may stand on his own feet thenceforth.

This report provides a sharp analytical framework for assessing where a helping hand is most effective, and I congratulate the committee on its work. I will confine my remarks to the general issue of the effectiveness of aid and then pick up the more controversial aspects of the report to do with whether we should commit to the timescale that we set ourselves and the manner of so doing. The consensus across the report that poverty alleviation and sustainable development should continue to be our priorities is welcome. I was much taken by Professor Collier’s succinct description of the need to continue with giving when he said,

“growth is not a cure-all; but the absence of growth is a kill-all”.

That speaks volumes. The other area of great consensus across the field is that private investment and capital flows, along with remittances, are far more powerful levers and actually do most of the heavy lifting when decent governance is in place and countries are able to move from being low-income countries to middle-income.

I was disappointed to note that the share of technical assistance in the overall development assistance budget expended by us both in the UK and in EU programmes was rather lower than the budgetary support provided. The report points to all the evidence showing that technical assistance, and the expertise provided through it, strengthens institutional capacity in low-income countries through improved tax collection, audit and legal systems and can embed capacity within those countries in the longer term. Can my noble friend give the House the Government’s current assessment of the Commonwealth’s technical assistance programme, which they found to be less than effective in their last review?

I also have to disagree profoundly with the report’s scepticism about using aid to put in place mitigating measures for climate change. There are good reasons why we have to help developing countries with the mitigation challenge. First, we have a historic responsibility as one of those countries that have pushed the earth’s atmosphere close to the point where further climate stability can no longer be guaranteed. Secondly, there is a need to put developing countries on a development trajectory that does not repeat our mistakes in pursuing a fossil fuel-based industrialisation strategy. Thirdly, it is imperative to widen the participation of developing countries in international mitigation efforts so that we can build a broad coalition in support of a stronger climate regime post-2015. I note that the noble Lord, Lord Stern, is in his place and look forward to hearing his remarks in this regard.

One of the main thrusts of the report is that it is rather difficult to measure the marginal impact of spending with an increase in growth. These things are different for each country at each stage of its development, so I welcome the committee’s view that it is clear that there is no negative impact on growth. However, leaving aside economic growth as measured by GDP, there is good evidence that it is very useful, and promotes growth in the long term, if it is used for building resilience. My noble friend Lord Ashdown of Norton-sub-Hamdon noted in his Humanitarian Emergency Response Review that for every £1 spent on preventing disasters, £4 was saved in responding to them. Likewise, the committee notes that post-conflict states also have better marginal returns for every dollar expended. Again, as Professor Collier points out, it is important to provide jobs if you want sustainable demobilisation for soldiers.

I know that the committee was rather taken with the evidence of Mr Rory Stewart, who dismissed the concept of a “lessons learnt” model whereby one can to some extent extrapolate from one particular circumstance to another. Although I agree with the idea that there is no template for stabilising post-conflict situations, we do have useful experience to draw on. Mr Stewart, in my view, misunderstands what he describes as liberal imperialism. The idea was founded in the 19th-century context that if you were going to expand empire to other parts of the world, you should try to promote standards there that reflected what you thought was successful at home. The idea that our development assistance today, whether disbursed bilaterally or multilaterally, is to replicate “civilisational standards”—in the lexicon of 19th-century liberal internationalism—is, frankly, to treat today’s endeavours with contempt. I wonder whether the role of the Marshall Plan in providing aid in post-conflict Europe or the writing of the Japanese and German constitutions to entrench the rule of law would count as liberal internationalism. Furthering gender equality or the rule of law is the right thing to do in a post-conflict society and some of us are sure that Afghanistan will emerge the better for our engagement there, even if it takes longer than we expect.

I will touch on the enduring concerns that we all have on the propensity for aid to be wasted through corruption. In 1950, the economist Lord Bauer said:

“Foreign aid is a system of taking money from poor people in rich countries and giving it to rich people in poor countries”.

It can do no justice to the taxpayers of the DAC countries to find that their donations are siphoned away by corrupt elites in developing countries. The fungibility of aid clearly makes this a trickier problem to solve, so will my noble friend be able to tell the House whether the Government intend to take up Transparency International’s recommendation that they should attempt to get the G20 countries to agree rules to discourage illicit capital flight from those developing countries?

I come to the issue of whether we should stick to our target and, secondly, whether we should enshrine this in law. The argument for spending 0.7% seems irrefutable for the UK currently. It is certainly a significant sum of money in raw numbers but looks rather different when seen in perspective: it amounts to just 1.6p of every pound of government spending, when 75% of the world’s poorest people live on less than $1.25 a day. Setting our sights on fulfilling our target is right, despite the current state of our finances.

However, I will speak to the merits of legislating for the target ad infinitum. I am not speaking for the Liberal Democrats here but as an individual who has seen, more than once, the effects of legislation that is not fit for purpose after some time has passed. I am also keenly aware that if I were a taxpayer in Greece, Spain or Portugal—all three of which are DAC members—in the current climate I might feel that restoring my own country’s finances, in light of the enormous strain that those economies are under, might be my priority. Were we to enshrine this commitment in law, it would take away any flexibility on our part should our own financial situation weaken. Even more importantly, noble Lords might be able to imagine some sunny uplands in the future where our statute-enshrined obligation for development assistance is no longer needed to the same extent or for the purposes it was defined for.

To use another analogy, if we were to take peace and stability as our target in this increasingly unstable world, then perhaps we should have enshrined our implicit commitment to NATO spending, which is at least 2% of GDP but below which we have fallen.

I wholeheartedly support the target but am concerned about enshrining it in law. However, I accept that all political parties committed to this and that it is part of the coalition agreement. My own proposal, which might assuage some of the concerns about an enduring commitment, would be that if we do move to legislate, we have a requirement for a substantial review at the end of a 10-year period and perhaps insert a sunset clause into the Bill that will come into play should the conclusions of the review suggest that we are able to adjust the target either up or down. This would allow us to fulfil our current commitments, provide space for the planning of programmes and provide certainty of funding for the next period; but would enable us to reconsider, if necessary.

I conclude simply by thanking the committee for this report, which has added significantly to our understanding of the issue.