The Tories are making a mockery of the aid budget – either spending it in the UK, Ukraine, or India’s beauty salons

Two new reports have revealed just what a mess the UK aid system is in – with the Tories effectively making a mockery of the idea of Britain supporting poorer countries. With huge sums of money going to Ukraine, more going back into the UK, and foreign aid ‘investments’ including beauty salons in India, people are asking questions about just what is going on.

Foreign aid: funneled to the UK…

On Thursday 14 September, the Foreign, Commonwealth, and Development Office (FCDO) published its report for 2022 on how the government spent Official Development Assistance (ODA) – also known as ‘foreign aid’. This is money that mostly goes to the FCDO, but also other government departments like the Home Office. Essentially, the report showed that, far from spending the money on poor countries that were in desperate need, the Tories were often funneling it into the UK itself.

Bond is a UK network of NGOs. It analysed the FCDO report – which included figures on bilateral aid. This is where the UK government gives money directly to another government/s for a specific purpose. Bilateral aid made up over 75% of the UK’s total aid spend in 2022. Looking at the figures, Bond found that:

• The UK provided the lowest levels of aid since 2016 to lower-income countries. It gave 51% of all bilateral ODA to the lowest-income countries in 2022 – down 13% on 2021 and 47.8% on 2020.
• Then, it gave the largest proportion of bilateral ODA to itself to deal with refugees. 28.8% (£3.7bn) of the total ODA went on this. It gave the Home Office £2.4bn (18.7% of total ODA) for refugees – up from 4.1% in 2020 and 9.1% in 2021.
• Meanwhile, it allocated 59.7% of all ODA to the FCDO. This was its lowest share since the government began producing statistics.

… and Ukraine

When looking at regions of the world, Bond noted that the share of ODA the UK gave to Africa dropped below 50% for the first time since the government began producing these statistics. It gave 42% (£1.2bn) of bilateral ODA to Africa – down 52% since 2020. For example, the UK gave Sudan 68.45% less than it did in 2021. This was a cut of £64.5m – despite the country being ravaged by civil war and millions of people needing humanitarian aid.

Meanwhile, Ukraine jumped to being the country the UK gave the second-highest amount of aid to, behind Afghanistan. The UK gave £342m to Ukraine. 58% of this went on humanitarian aid, but 33% also went to “government and civil society”. It is not clear from the FCDO report how the Ukrainian government spent this money.

The Tories have ‘lost their grip’ – or have they?

Bond’s director of policy and advocacy, Gideon Rabinowitz, said of the figures:

The government has lost its grip on the UK aid budget due to the uncontrolled spending by the Home Office on costs associated with refugees in the UK. This has undoubtedly weakened the UK’s ability to effectively respond to urgent global crises and challenges, such as climate change or the looming famine in East Africa.

Refugees and asylum-seekers urgently need sufficient support, but it needs to be better managed and should not be provided at the expense of millions of people facing conflict, climate change and poverty globally. Taking a robbing ‘Peter to pay Paul’ approach to UK aid is both wrong, and unnecessary, and ultimately it harms the UK’s reputation as a globally responsible partner.

Of course, part of what UK aid – and specifically that sent to Ukraine – is all about is foreign policy, international influence, and the British private sector. Aid serves as “soft power” – a way a country can exert influence over another without the use of force. The UK government wouldn’t say out loud that this was its intention in Ukraine. However, think tank the British Foreign Policy Group (BFPG) has. It noted in a report that it thinks the UK government has:

an opportunity, drawing on the experience of Ukraine, to position humanitarian and development aid, and reconstruction, as a key enabler of the UK’s sovereignty, security and prosperity objectives.

That’s a lowkey way of saying the UK involving itself in Ukraine will not only make it money, but strategically deliver what it wants in terms of a weakened Russia and more influence in Europe (without being in the EU), and globally.

British aid investments: propping up the private sector

On top of this, another report showed what happened when aid is used for private sector purposes. In short, it goes very wrong.

On Friday 15 September the Committee for International Development (IDC) released a report. Called Investment for Development: The UK’s Strategy Towards Development Finance Institutions, it looked at British International Investment (BII) amid concerns over fraud and social and environmental harm.

BII was originally set up in 1948. Now, as the IDC report said:

BII invests capital in businesses either directly (by investing equity or providing loans and other debt finance) or indirectly (by investing through financial intermediaries such as private equity funds, banks or micro-financing entities).

That is, it invests in the private sectors of other countries. Predictably, BII gets much of its funding from foreign ODA – with the FCDO ploughing hundreds of millions into it every year.

However, the IDC found all was not well. It noted that BII:

• Holds fossil fuel investments.
• Has investments via an intermediary in an education company which is alleged to have violated workers’ rights, with staff were accused of child sexual abuse, and had a child die on its watch.
• Has 28% of its entire investment portfolio concentrated in India – which is classed as a middle-income country, not a poor one.
• Does not have control over where its investments go, including putting money into a food and beverage outlets and a cosmetic surgery centre.

Overall, the IDC report found that BII’s investments sometimes conflict with the Paris Climate Change Agreement and the UK’s Sustainable Development Goals (SDGs). The committee also noted that:

BII’s investment in companies owned by high-net-worth individuals risks those investments not driving inclusive economic growth and restricts the ability of investments to reduce financial and social inequality. BII’s use of a $5.50 per day income marker to target investment activity has resulted in a high concentration of its portfolio in middle-income countries, with concerns that those investments are not always directly benefiting the world’s poorest people.

The degradation of the notion of aid

Rabinowitz said of the IDC report:

It is unacceptable that BII is de facto exempt from the UK’s climate commitments on aligning all new UK aid with the Paris Agreement by the end of 2023 and has no clear timeline to exit fossil fuel investments.

BII should be a trailblazer in development finance leading the way and role-modeling sustainable, transparent, accountable investment with a clear development impact. When climate change is felt in all corners of the world, there should be no ifs or buts about ceasing financing carbon-intensive ventures.

Coherence of BII’s investments with the government’s own commitments on fossil fuels, climate, sustainable development goals, or poverty reduction will never be possible with the government’s current hands-off approach. BII’s governance needs to be radically reformed to ensure that as a publicly funded organisation it is a visible operational arm of the UK government’s international commitments.

So, UK aid is firstly failing to help the world’s poorest people. Instead, the Tories have been ploughing either into Ukraine, back into the UK itself, or to countries it helped destroy and make even poorer – like Afghanistan. Then, the Tories also syphon aid money into private sector investment in countries that are hardly in desperate need of it. Overall, they’re using aid as soft power – to exert influence where they see fit.

‘Aid’ is supposed to be just that: money a richer country gives a poorer country. However, the Tories are overseeing the degradation of this notion – and, it seems, intentionally so.

Featured image via the FCDO – Flickr, resized to 1910×1000 under licence CC BY-ND 2.0