British Development Policy: What Changes should the New Government Implement?
A renowned expert on foreign and development policy recommends a relaunch of institutions after the Labour victory – including a development bank.
In Fourth Place Among OECD Donors
With Official Development Aid of 19,1 billion Dollars (15,4 billion Pounds) Great Britain in 2023 was in fourth place among industrialized nations and reached an ODA quota of 0,58 percent of Gross National Income (GNI). The share of costs for domestic refugees rose to 28 percent of ODA. Humanitarian aid receded by 20 percent compared to the previous year. Observers see little financial leeway for the new Labour government to raise its development aid budget significantly.
DFID (Department for International Development) – an integrated development ministry – was an effective and innovative organisational model (it was closed down in June 2020 under Prime Minister Boris Johnson). But it was rooted in its time in the immediate post-cold-war era. In the mid/late 2020s, in an increasingly multi-polar world where the UK is a declining share of the global economy and trust between the 'west' and the Global South has hit a low, a values-led development offer is simply not credible with partners.
FCDO (Foreign & Commonwealth Development Office) – a fully integrated foreign and development affairs ministry – was put together in haste and has struggled. Foreign affairs priorities have trumped development with a consequent shift to a shorter-term focus, less attention to underlying evidence and impact, a reduction in overall staff numbers working on development, an erosion of expertise, and incentives for top talent to shift from development to wider foreign affairs. The loss of influence in the development space was significantly accelerated by declining ODA (Official Development Aid) budgets and rapidly growing refugee related costs.
Looking ahead, what might an appropriate UK development offer look like? This insight piece seeks to prompt debate on the shape of the UK's future international development and climate offer.
A need for clarity on the UK’s objectives:
- Impact on issues that matter for long term UK prosperity and security: this implies a focus on priorities like international economic instability and growth (including poor countries), inequality (including gender), climate, and conflict and security
- Influence with the international system: implies a focus on investing in key multilateral and regional bodies and working with partners to make them more fit for the future
- Influence with key developing country partners: focus grants on selected LICs (Low Income Countries), develop non-concessional instruments for MICs (Medium Income Countries), and back country-led strategies/priorities (localisation)
What does this mean for how the UK's development offer is structured?
I. Integrated oversight of international affairsincluding development and climate change in one ministry to ensure policy coherence: this implies integrated political oversight, strategy setting and decision-making on policy and 'wholesale' spend choices (ie funding allocations to multilateral and bilateral programme priorities) with political accountability running through a Cabinet level International Climate and Development Secretary and full accounting officer responsibilities for all ODA spend (including staffing) running through a 2nd Permanent Secretary. They would operate alongside the Foreign Secretary and Permanent Secretary and within the framework of the International Development Act.
II. A multi-instrument bilateral delivery model for development and climate action - managed as a coherent group of "retail" agencies with the balance of staff overseas rather than in the UK - to create sustained impact:
a) British International Cooperation - a new bilateral agency to manage UK aid grants to support development and climate related technical assistance in selected low income (and potentially lower middle income) countries and bilateral humanitarian assistance. Overseas staff would continue to operate from embassies. The case for a new agency rests on:
- a clear mandate that promotes and targets the economic development and welfare of developing countries
- once approved at ministerial level, programme delivery choices rest with BIC and are based on programmatic considerations (ie evidence, performance and impact)
- anchors government expertise and capability and the use of data and metrics in the development and climate space
- serves all government ministries, i.e. a consolidated delivery model for all government ODA providers including FCDO, DESNZ (Department for Energy Security and Net Zero), DEFRA (Department for Environment, Food & Rural Affairs) and others
- consolidates grant, procurement, human resources and project management capacity thereby enabling more of the delivery chain to be brought into government structures rather than sub-contracted and managed through contracting agents (which is the case at present for most technical assistance and humanitarian operations)
- secures improved value for money for UK taxpayers – and enhanced credibility with partners
b) British International Investment Bank – a development bank, building out of BII (British International Investment – and potentially the UK Infrastructure Bank) with borrowing rights in capital markets so that aggregate investment flows are a multiple of government ODA injections.
The case for a development bank rests on:
- an expanded mandate to include economic development and climate outcomes in low and middle-income countries
- sovereign lending capabilities to complement BII’s existing private sector instruments
- a range of instruments enabling appropriate terms (concessional and non-concessional, equity and loans, technical assistance) for different groups of clients / partners
- the ability to co-finance with UKEF (UK Export Finance) and other international development finance institutions
- structured (either through shareholding, risk management or other arrangements) so that its borrowings sit outside the UK's national debt
c) British Council – a clear mandate and resource settlement (including non-ODA funding) to focus on promoting cultural and educational partnerships overseas.
d) Westminster (rename as “British”) Foundation for Democracy – an expanded mandate and resources to focus on strengthening governance, human rights and democratic settlements internationally.
III. A medium term commitment to spend at least 1% GNI (Gross National Income) for planned international spending inclusive of ODA – sitting alongside the commitment to spend 2% for defence – to deliver UK international priorities. Any major unplanned expenditure should be a draw on the treasury reserve as is the case for unforeseen military/security operations.
This article was first published by ODI (Overseas Development Institute) global affairs thinktank.
Moazzam Malik is Managing Director for Global Delivery at World Resources Institute (WRI). He is a former Director General in FCDO and DFID and British Ambassador to Indonesia and the ASEAN. He recently co-authored ‘The World in 2040: Renewing the UK’s Approach to International Affairs’ with support from ODI's Mark Miller amongst others.
