Government may withdraw billions from overseas projects

Billions of pounds in aid spending is to be reviewed by the Government as it begins a far-reaching efficiency drive that could see funding withdrawn from some overseas development projects.

Andrew Mitchell, the International Development Secretary, is to look again at funding worth around £3bn handed to international agencies linked to the World Bank and the United Nations in an attempt to reward those which can demonstrate they have been effective in delivering improvements to the lives of the world’s poorest communities. However, he has already been accused of adopting a “slash and burn approach to overseas aid”.

Mr Mitchell has now written to the organisations handed money from the Department for International Development (DFID), telling them that the “Multilateral Aid Review” is to start immediately. It signals a change of direction for the department, which looks set to move away from funding the UN and the World Bank in favour of funding projects more directly.

The collation Government is committed to spending 0.7 per cent of GDP on aid by 2013. Government sources confirmed that any money taken from organisations deemed to be inefficient will be ploughed into other aid projects. However, a review of the large slice of DFID’s £5.5bn budget handed to charities is also not far off. “We want to make sure that there are results on the ground, rather than wasting money on the bureaucracy of people sitting in headquarters,” said a Whitehall source. “We will be looking at all the department’s spending in due course.”

Around £2.27bn was handed to multilateral institutions last year, including £574m to the World Bank and £252m to the UN. That looks set to rise to £3bn this year. Organisations including the African Development Bank, the UN Joint Programme on HIV and AIDS, and Global Fund to fight AIDS, TB, and Malaria will be tested to see if they overlap with other bodies or fail to have a high enough proportion of their staff working on the front line.

However, some aid industry figures criticised the change in direction. “There is growing concern at the Government’s real agenda on international development,” said John Hilary, executive director at the anti-poverty charity War on Want. “Andrew Mitchell has already cancelled a number of initiatives that had been identified as important contributions to the fight against global poverty. This is beginning to look like a slash and burn approach to overseas aid, and that is very worrying.”

Melissa Hall, aid policy adviser at Action Aid also warned against a move away from funding agencies. “We hope this review will examine whether aid delivered through multilateral institutions puts developing countries in the driving seat,” she said. “While reforms are needed across the multilateral agencies, the evidence is that multilateral aid can deliver greater benefits than government to government aid by offering greater predictability, reducing transaction costs for recipient countries and maintaining a focus on poverty.”

Other charities gave a cautious welcome to the review. “The Government should take this opportunity to halt funding increases to the World Bank which often ignores the evidence of what works and allows private sector dogma to get in the way of successful aid delivery,” said Max Lawson, Oxfam’s head of development finance. “On the other hand, institutions such as the Global Fund to Fight Aids, Tuberculosis and Malaria have a proven track record of success and deserve to benefit from increases in the UK aid budget.”

Alex Cobham, chief policy adviser at Christian Aid, said charities already had to prove they were working efficiently and said multilateral groups should come under similar scrutiny. “In common with other NGOs, Christian Aid is held to very high standards of accountability and effectiveness when it is awarded DFID funding for our poverty reduction initiatives in the developing world,” he said. “We would be delighted if the UK government was to hold multilateral recipients of its aid to the same standard. As one of the largest donors to the World Bank and other international institutions, the UK is well-placed to make these demands.”

Mr Mitchell said: “Many of these organisations will be critical to our fight against poverty and that is why I want to direct money towards those bodies that share our aims and have a proven track record of delivering results.”