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									                             Comprehensive Spending Review 2007
                                 UK Aid Network Submission
                                       February 2007


[About UKAN]

Introduction
The Millennium Development Goals will only be met if there is a rapid increase in
both the volume and quality of aid. The Comprehensive Spending Review is an
opportunity for the Government to demonstrate its continued commitment to more
and better aid, and to show how the UK will meet the commitments made to the
world‟s poor in 2005.

The Government has played an important role in securing public and international
support for aid. The CSR is a chance to make sure that this support is met by real
increases in funding and improvements in aid quality and effectiveness. The CSR
must be about delivering results for poor people – by meeting the 0.7% target without
counting debt relief, by increasing aid effectiveness, and by exercising effective
influence in the international system.

The CSR must allocate sufficient resources to DFID to enable the UK to meet the
0.7% target by 2010, without counting debt relief, which means giving some $10bn in
aid each year by the end of the CSR period. This will entail rapid increases in
funding for DFID, but, given the acknowledged benefits of frontloading aid, is vital to
demonstrate the Government‟s commitment to international development, and to
Africa in particular.

DFID must continue to improve the effectiveness and accountability of its bilateral
programme. Much progress has been made already – the poverty focus of UK aid,
the increased use of country systems and the emphasis on country ownership are all
to be welcomed. But DFID can, and must, do better. UK aid needs to be more
predictable and transparent, and more accountable to people in recipient countries.
DFID should build on the progress made in reforming conditionality policy to ensure
that country policy choices are country led, not donor led, and DFID technical
assistance must do more to build local capacity for the long term.

DFID, and the Government more broadly, must also continue to work with other
donors to ensure that the international aid system delivers results for poor people. In
particular, DFID should work with the World Bank to reform its conditionality policy
and practice, and with the EC to improve the poverty focus of European aid
programmes.

Aid Volume
The CSR should provide enough funds for the UK to reach the target of giving 0.7%
of GNI as aid by 2010. This means the UK giving around £10bn a year in aid by
2010/11.1

We are firmly opposed to the counting of debt cancellation and relief towards the
0.7% target. Debt cancellation is a crucial element of securing economic justice and
sufficient resources for impoverished countries: it provides resources for poverty
reduction in a predictable and effective way. But poor people need aid and debt
cancellation. There are strong reasons for not counting debt relief as aid:
1
    All figures in this document are in 2005/06 prices.


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    Counting debt relief towards the 0.7% target effectively means that the value of
     debt relief is being offset by a reduction in the non-debt relief aid that would
     otherwise be delivered in order to meet the target.
 When debt cancellation and aid volumes are announced separately, giving the
     impression that they are separate amounts of money, when in fact debt
     cancellation has often been included in the „aid‟ debt relief is double counted and
     the public are given a false impression. Monitoring and targets for aid that include
     debt relief do not give a transparent or realistic picture of what most people
     understand as „aid‟.
 Debt relief is an issue of justice. Donors share responsibility for the poor
     lending/borrowing decisions that created many of today‟s debts. The poor should
     not pay, through reduced aid, for the cancellation of debts that cannot anyway be
     legitimately claimed from them.
Throughout this submission, when we refer to „aid‟ we mean ODA excluding debt
relief.

Taking as a baseline the DFID DEL figures announced in 2004 for 2006/07 and
2007/08, and assuming that debt relief funded from the DFID budget and aid
channelled via other departments remain at historical levels during the CSR period,
DFID‟s budget needs to increase by some 21% annually in real terms over the period
of the CSR (reaching around £9.5bn in 2010/11) in order to meet 0.7% by 2010
without counting debt relief.

Even to meet the Government‟s existing commitment to reach 0.7% by 2013, DFID‟s
budget will need to rise by around 13.5% a year over the period to 2012/13, to
around £8bn by 2010/11(based on the same assumptions).

The CSR must provide more than an indication of when the 0.7% target will be met –
it must include a clear and binding timetable setting out how the target will be met,
without including debt relief. All CSR announcements must make clear whether debt
relief is included in commitments and projections, and if so, how much. The CSR
must also make clear what proportion of DFID‟s budget will be scored as ODA, and
what proportion of UK ODA will come from other departments.

All the figures above assume that levels of debt relief funded from DFID‟s budget
continue at historical levels (around £50m a year) but make no assumption about the
levels of debt relief required outside DFID‟s budget. If the Government believes that
DFID will require more than £50m a year to meet its obligations to the HIPC initiative
and the Multilateral Debt Relief Initiative, additional funds must be provided in the
CSR. In addition to the increases in DFID‟s budget outlined above, the UK must
recognise the ongoing debt crisis and its shared responsibility for its creation, and
cancel debts accordingly. At a minimum, the UK must make funds available for
cancellation for the 67 countries identified by the Chancellor as needing “full debt
relief”. This could amount to some £Xm over the period of the spending review in
addition to DFID‟s budget.

Allocations to Multilateral Agencies
There are strong reasons to support multilateral aid. By virtue of their greater size,
multilateral agencies can often engage in a wider range of countries than DFID, and
are a means of the UK funding development activities in countries where a DFID
programme is not appropriate. Multilateral aid can reduce administration costs and
improve coordination at the country level. There is also some evidence that
multilateral aid can be more effective than bilateral aid, although this is not as clear in
the case of DFID‟s bilateral programme. Engagement with multilateral agencies such



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as the World Bank and the EC gives the UK an important influence over the way aid
resources are spent beyond its own bilateral programme.

However, funds should not be allocated to multilaterals by default, or simply as a
means to rapidly disburse aid from the UK. UK aid should be allocated to multilateral
agencies in order to maximise the overall impact of aid on poverty reduction. This
means both assessing the effectiveness of different multilateral agencies when
making allocation decisions and using UK influence to improve the performance of
agencies receiving UK funds. DFID must ensure that it dedicates sufficient
resources to influencing the policies and practices of the multilateral agencies and
funds which it supports.

We know that aid is most effective when it funds programmes developed and led by
governments in recipient countries. It is essential that UK contributions to multilateral
agencies take account of their record in promoting country ownership, and in
particular their conditionality policies. The UK should also ensure that steps are
taken to increase the accountability of the multilateral agencies which it supports,
both for their operations at country level and for their policies at headquarters level.

The UK should ensure that aid channelled via multilateral agencies goes to meet the
needs of the poor – this means supporting multilateral agencies which allocate funds
to the poorest countries and to programmes which focus on the basic services which
are essential for poverty reduction.

In particular, the CSR settlement must take account of the following concerns with
respect to particular agencies:
 The World Bank and IMF continue to impose economic policy conditions on
    poor countries. The UK government must repeat its successful strategy of
    holding back a proportion of its IDA contribution contingent on reform of World
    Bank conditionality, specifically the phasing out of economic policy conditions and
    continued progress on the implementation of good practice principles in the
    application of any financing conditions. The UK must also ensure that the World
    Bank and IMF adopt a „demand driven‟ approach to research and technical
    assistance which responds to recipient needs rather than supporting Bank/IMF
    policy positions, and seeks to build the capacity of developing countries to
    evaluate all the policy tools at their disposal rather than promoting a narrow set of
    predetermined policies. The UK should also push for reforms to the CPIA index
    used to allocate IDA funds, including full transparency on how the figures are
    arrived at, an independent review of indicators and their weighting, and the
    inclusion of outcomes-based indicators.

    The World Bank and IMF must be more accountable to poor countries. The UK
    should support reforms to governance structures which are tailored to the
    individual needs of the IBRD and IDA. In particular, a mechanism for the
    systematic participation of recipient countries in the IDA replenishment process
    should be elaborated. In the IMF, the UK should use the unique opportunity to
    push for comprehensive reform of the governance at the IMF rather than focusing
    only on a quota formula change that may shrink the voice of developing countries
    rather than empowering them. Disclosure policies should be reformed in line with
    the recommendations of the Global Transparency Initiative IFI disclosure charter.

   The UK must demand a significant increase in the proportion of EC aid targeted
    at low income countries, based on objective resource allocation criteria applied
    globally across all EC development programmes. The UK must also ensure that
    all EC aid is accountable, transparent and based on national ownership of


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    development policies and strategies. The UK should aim to ensure that EC aid
    meets the principles of the Paris Declaration on Aid Effectiveness, particularly on
    alignment and harmonisation, increased poverty reducing budget support,
    increased predictable resource flows and enhanced measures to mitigate shocks.
    EC development assistance must be ODA reckonable on DAC terms. The UK
    should work towards a radical reorganisation of the European Commission
    services in charge of external aid to eliminate duplication, incoherence and
    cumbersome procedures and relate policies more closely to implementation.

    All this said, the CSR should recognise the significant improvements in EC aid
    effectiveness made in recent years. Much has undoubtedly been done to
    increase the speed, accountability, quality and effectiveness of EC aid and to
    establish a clear and robust overall policy framework. The European Consensus
    on Development signed in December 2005 sets out a common vision for
    development prioritising poverty eradication in least developed countries, more
    effective delivery of aid and better coherence of EU policies with development
    objectives. Furthermore, there are some very positive elements in the EC‟s new
    financial instrument for development – the Development Cooperation Instrument,
    which is based on the European Consensus for Development and the principles
    defined within the development articles of the EC Treaty. The European
    Development Fund (EDF) has also improved over recent years, with speedier
    and more effective implementation of assistance.

   UN agencies could play a larger role in key areas including peace building,
    humanitarian aid and water and sanitation. The UK should continue to support
    the ongoing reform programme to speed up the process of moving towards „one
    UN‟ at country level.

Bilateral Allocation between Countries
The UK must allocate aid funds between countries according to need. The allocation
criteria must be clear and transparent, and take account of both poverty levels and
the availability of funding from other sources. We suggest that DFID continues to
give at least 90% of bilateral funds to low income countries and allocates at least
50% to Sub-Saharan Africa. Allocation according to need must not be distorted by
UK security or foreign policy concerns and priorities.

Although we recognise the need to also allocate funds with a view to maximising
effectiveness/impact, we have significant concerns about allocation criteria based on
countries‟ „policy environment‟:
 Indexes such as the World Bank‟s CPIA often reflect a specific perspective on
    what „good policy‟ is. Allocations which use such indexes can become de facto
    policy conditions – the CSR must ensure that DFID‟s bilateral allocation criteria
    do not contradict the UK policy on conditionality.
 There is some doubt about the relevance of „good policy environments‟ for aid
    effectiveness in any case. DFID‟s bilateral allocations must be based primarily
    on need – DFID should prioritise the development of aid instruments appropriate
    for different country contexts.

The CSR should include a clear explanation of the basis for allocations between
countries.

Sectoral Priorities
Poverty reduction should continue to be the central objective of UK aid. Country
ownership should be the first principle, which means ensuring sufficient flexibility at
the country level to reflect local priorities (e.g. African governments have committed


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to allocating 10% of budgetary spend to agriculture). This said, UK aid should
continue to emphasise the importance of basic services for poverty reduction, as
recognised in the MDGs. Essential services (health, education, social protection,
and water and sanitation) provide the building blocks of human development, and it is
the primary duty of all governments to ensure that all groups, including the most
vulnerable, have access to these services. UK aid must support access to such
services by providing appropriate political and financial support at country level.

The focus of UK spending on these basic services must be on building up
sustainable country systems which respond to local priorities and circumstances.
DFID must balance its role as an advocate for the needs of the poor with the need to
respect the outcomes of national policy processes.

The UK has made, and led, international commitments to achieve universal access to
HIV Prevention, Treatment, Care and Support by 2010, and to ensure that all credibly
costed national HIV and AIDS plans are fully funded. Whilst a number of these plans
are currently being costed, UNAIDS estimates that a minimum of $23bn will be
needed annually by 2010. In 2007, the estimated global funding gap is over $8bn.
The UK's spending on HIV and AIDS must reflect the resources required to achieve
the target of Universal Access by 2010, and ensure the funding gap is filled.

[Brief para on education]

In the recent white paper, the government outlined its approach to governance and
anti-corruption, an approach that is broadly supported by UKAN members. In
particular, we welcomed the recognition that it is important to respond to the causes
of corruption, rather than specific cases, which requires a long-term investment by
donors in supporting the evolution of effective and accountable governance systems.
We also welcomed the recognition that it is important to support elements in society
that can hold government to account – parliament, auditor general‟s offices,
academia, media and civil society. However, DFID‟s governance and anti-corruption
work must be rooted in the practical realities and experiences of individual countries
rather than simply imposed from outside – country leadership in this area is vital. The
CSR must ensure this more holistic approach to governance underpins DFID country
programmes and that there are sufficient resources for supporting „demand side‟
governance in a more coherent way.

Aid Effectiveness
The CSR must continue the progress which DFID has made in making its aid more
effective. This will be challenging if it is expected to deliver a much larger aid
programme with fewer staff.

The departmental strategy must demonstrate how staff will be deployed strategically
to maximise effectiveness across the aid system i.e. including multilateral aid and
other bilateral programmes. DFID must maximise its impact on other donors in
international fora such as the OECD DAC and the EU to ensure that all aid is untied,
predictable and targeted at the needs of the poor; and is delivered in ways which are
transparent, accountable and based on national ownership of development policies
and strategies, rather than externally-imposed conditions.

With respect to the DFID bilateral programme, the CSR must deliver real progress in
a number of key areas:
 DFID must continue to use a mix of aid instruments. Direct budget support is
   particularly important to building up country systems and supporting country
   policy choices. DFID should continue to give at least 50% of its programmable


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    bilateral aid as budget support, and should increase the use of long-term budget
    support compacts which allow countries to make long-term policy decisions.
    DFID must also develop more effective instruments for engagement in countries
    where direct budget support is not appropriate.
   Although multi-year budget support arrangements improve predictability, DFID
    must do more to ensure that its aid allows country governments to make long-
    term policy decisions. One key aspect of this must be to make DFID decision-
    making more transparent – the criteria upon which budget support (and other aid)
    will be disbursed or withdrawn from particular countries should be clear and
    transparent to recipient governments, parliaments and civil society.
   DFID must continue reforming its conditionality practice to ensure country policy
    choices are country led, not donor led. This means making sure that there is real
    change in practice at country level in line with the conditionality policy, and
    requires full transparency of all UK conditions.
   All UK technical assistance must build capacity in country and an increased
    proportion must use country systems. The CSR should also commit DFID to
    increasing the proportion of TA supplied from countries in the South. This is a
    significant efficiency concern – although DFID untied all its aid five years ago, the
    overwhelming majority of DFID TA contracts (by value) still go to UK firms, which
    suggests that there are serious issues of market openness and competition that
    need to be examined.
   DFID must demonstrate how it will meet the commitments made to improve aid
    effectiveness in the Paris Declaration, and as a member of the EU.
   Increasingly, aid effectiveness will be determined by the quality of relationships at
    country level. DFID must do more to assess its partnerships at country level,
    focusing in particular on the degree to which bilateral programming is aligned with
    national policy priorities and administrative systems, but also taking into account
    DFID‟s wider relationships and influence, including with other donors.

Accountability and Transparency of UK Aid:
UK aid must be accountable both to UK citizens and to governments and people in
the countries where it is disbursed. Many of our recommendations above, on
conditionality, clear allocation and disbursement criteria, and transparency, relate to
this fundamental concern. The CSR must also deliver progress on some more
general accountability/transparency issues:
 There is a need for more transparency across the board about UK aid.
    Information about policies, allocations, commitments, disbursements, conditions
    and results should be available both to parliament, CSOs and citizens in the UK
    and to governments, parliaments, CSOs and citizens in the countries where DFID
    works. This requires more than making information available on request – DFID
    must work proactively to ensure that information is accessible.
 UK aid should be subject to more regular independent evaluation. We suggest
    that the CSR includes provision for the establishment of an independent
    evaluation office with mandate and capacity to examine the allocation,
    disbursement and effectiveness of all UK bilateral aid, reporting publicly to
    parliament. Evaluations should be responsive to the concerns of recipient
    governments and of civil society in recipient countries and the UK.
 Given the importance of multilateral institutions in delivering UK aid, it is
    important that there is transparency about the government‟s negotiations with
    them on issues relevant to aid effectiveness. Information about votes cast,
    positions taken and results achieved should be made available to parliament and
    the public.

Cross-cutting Issues and the Poverty Focus of Aid



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We support the Government‟s efforts to increase cross-departmental working on
issues such as climate change and conflict which have significant impacts on
development and poverty reduction, and believe that DFID could play a greater role
in some of these policy areas to ensure that the needs of the poor are taken into
account in wider government policy making.

This said, the current strong focus of UK aid on poverty reduction must not be
weakened, and DFID‟s position as the clear lead on UK development and aid must
not be undermined. If DFID is to play an increased role in issues such as climate
change mitigation/adaptation the CSR must provide it with additional funds. We
support the UK dedicating more funds to climate change mitigation and adaptation in
poor countries – we have a responsibility to compensate poor people who will be the
first to suffer the consequences of climate change caused by our actions – but this
must be additional to current commitments to increase aid funds for poverty
reduction. DFID must also do more to ensure that UK aid does not contribute to
increased carbon emissions, and encourage other donors to do likewise. In
particular, the UK should push the World Bank should lay out a timetable for phase-
out of its support for oil, gas and coal as called for in its own Extractive Industries
Review. [Possibly additional text from DEG here]

In relation to security, we are concerned that aid increases in recent years have
reflected the global and regional security interests of donors, with Iraq and
Afghanistan accounting for over half of the increase in net ODA from 2001 to 2004.
The UK must uphold the principle that its aid should benefit the poorest people in the
poorest countries. UK aid must never be diverted or allocated according to the UK's
perceived national/global security or foreign policy interests and the determination of
country and sector priorities should be based solely on the principle of poverty
eradication and pro-poor development.

All the figures given above assume that DFID‟s funds continue to be used for poverty
reduction – any expanded mandate for DFID must be matched with additional
funding in the CSR. While it may sometimes make sense for UK aid funds to be
spent via other government departments, DFID must retain a clear policy lead, and
there must be clear and transparent reporting of non-DFID aid spending. We see no
strong argument for non-DFID aid spending to increase above current levels.

Conclusion: Suggested Targets for DFID
Like all other government departments, DFID should be accountable to UK citizens
for its delivery. However, unlike other departments, DFID should also be
accountable to people in the countries where it works. New targets and objectives
for DFID must take this complexity into account, and should include measures which
reflect the experiences of those who are affected by DFID‟s work around the world.
We have suggested some targets for DFID below, and will be monitoring how DFID
performs against these across the CSR period.

[Do we want to suggest an overall government PSA on development/poverty
reduction?]

Delivery and Effectiveness of Bilateral Programme
-At least 90% allocated to low income countries, and at least 50% to Sub-Saharan
Africa.
-At least 50% delivered as direct budget support, with at least X% [Max – what would
the right number be?] delivered as long-term budget support compacts.
-All UK technical assistance demonstrably builds capacity in country and an
increased proportion [can we specify?] uses country systems


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-[Can someone suggest something measurable but not too inflexible on basic
services?]
-[Something on fragile states/post conflict etc?]

Relationships at Country Level
-DFID demonstrably supports country-led policy making and country systems, and
this is confirmed by positive feedback from recipient governments, parliaments and
civil society.

Accountability and Transparency of UK Aid
-Full transparency about DFID‟s policies, allocations, commitments, disbursements,
conditions and results.
-Regular independent evaluation of DFID‟s effectiveness, including feedback from
governments, parliaments and civil society in recipient countries.

Multilateral Aid
-Work with the World Bank, IMF and other donors to end the imposition of economic
policy conditions by the Bretton Woods Institutions.
-Work with the EC and other EU donors to increase the proportion of EC aid going to
low income countries to at least X% [Mikaela – what‟s a reasonable number?] based
on objective resource allocation criteria.

Influence on Other Donors
-Work with the DAC, the EC and other donors to ensure that all donors meet the
commitments made in the Paris Declaration to increase aid effectiveness, and all EU
donors meet European commitments in addition to this.
-Work with like-minded donors to achieve a progressive consensus on the use of
conditionality, with a view to ending the use of economic policy conditions across the
whole aid system.




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