Where now for the UK’s development policy?

Dr Samir Puri

Well, welcome, everybody, to Chatham House for this discussion on “Where Now for the UK’s Development Policy?” I’m Samir Puri. I’m the Director of Chatham House’s newly created Centre for Global Governance and Security. I’m just going to very quickly introduce those of us who are on stage. This is Jillian Popkins, who’s the Chief Commissioner of ICAI. Next to her is Liz Ditchburn, who is one of the Commissioners. And then there’s Harold Freeman, also a Commissioner, and Olivia O’Sullivan from Chatham House, Director of the UK in the World Programme.

And I think it goes without saying, but I will say it, that this is an extraordinarily timely discussion. This discussion would’ve had gravitas anyway, but as all of you know, you registered to attend this event in-person or online, maybe weeks ago. It just so happens that we are having this discussion the morning after Prime Minister Keir Starmer has announced not only the target for UK defence spending to increase by 2027 to 2.5% of national income, but for that to be funded by a reduction in the aid budget. But nonetheless, what we are here to discuss is not an immediate reaction to that announcement. We’re here to discuss the release and publication of this report by the Independent Commission for Aid Impacts, “How UK Aid is Spent.”

There are some hardcopies of this report already in the room. There’s also a QR code that you will find on the table just at the front, which means you can get yourself the PDF copy online on your own devices. And I’d strongly encourage you to get hold of that report, if you haven’t got hold of it already, after the discussion. Before we start, I just want to also let you know there will be a coffee reception immediately after our discussion here. So, at 1:00pm, we’ll be able to head upstairs and have some coffee, so hopefully, you can stay and join us around then.

I’m not going to belabour my introduction for too much longer, other than to say that the overarching global context in which aid is being thought about has already changed extraordinarily, given the decisions around US aid and given the deteriorating geopolitical security environment. But I’m very, very keen now to introduce Jillian Popkins, the Chief Commissioner, who is going to, I think, begin by telling us a little bit about ICAI, just for those of you who aren’t familiar with its role and its position within, sort of, the aid system here in the UK. And then, to hand the floor over to Jillian to talk through the report and some of its key findings. So, Jillian over to you. Thank you.

Jillian Popkins

Thank you. Well, first of all, thank you very much and thank you for hosting the event, and a very warm welcome and sincere thanks to those of you who’ve joined us in the room today and indeed, online, as well. We’re very excited to be launching the first report of ICAI’s Fourth Commission. The Independent Commission for Aid Impact scrutinises UK development spending. We do that to enquire whether or not it’s reaching the people it’s meant to reach and is delivering impact and value for money for the UK taxpayer. And we do that through a series of reviews and reports, such as the one that we are launching today, that put independent rigorous facts and analysis in the public domain and support Parliaments, as well, in its role in holding the government to account and scrutinising UK spending. So, that’s who we are and why we’re here.

And we’re very excited, as a team of new Commissioners in the Fourth Commission, to be sharing it with you today, in timing that, as you’ve said, could not have been predicted. Somebody put on my social media last night, “You must all be revising your speaking notes.” And in fact, when I thought about it, actually, we’re not, because, you know, it’s very, very important at any time, when the context changes, that really clear, transparent, reliable facts about how aid is spent and what impact it’s having is in the public domain and is available for people to understand where that spending goes and what choices government is faced with and how effectively aid is being delivered. So, I think actually, I think it makes the report as timely as ever and as important as ever, so that we are understanding exactly where the starting point for this next round, sadly, of cuts, will be, from the current picture of UK aid.

So, when we started the Fourth Commission, we really felt that it was quite difficult, there is a lot of information out there, it was quite difficult to see a complete and comprehensive picture of where spending was going, after the, sort of, longer-term trends, but particular volatility and the series of cuts and changes since 2020. So, we wanted to pull all of that together and as we did it, we realised it would have wider benefits and that’s why we’ve published it in the report today. The report itself, basically, looks at a series of questions. How is UK aid spent, where is it going, and how is it being delivered? What are the channels that are being used to deliver it? And around those three themes, we can, as I said, see what choices and constraints there are in a context of extreme need, geographical and geopolitical volatility and also, constraints to development finance overall.

So, we’re going to use the work for two purposes, as ICAI, and we want to use it as an evidence base, to inform the future reviews and scrutinies that we’ll be doing during this Fourth Commission. And we also wanted to use it as a, kind of, baseline, so we can see over the four-year period, what’s the, kind of, cumulative effect of choices and decisions that leads to a particular focus and use of UK development assistance and what – and the impact that it will be having?

So, to the report. It starts by describing the global development context. As we all know, development is faltering, progress is faltering. Extreme poverty is ex – is very closely intertwined with climate change and conflict. Forced displacement and global migration are on the rise, as indeed, is also conflict. It highlights a humanitarian system under extreme strain, and it also notes that the spread of democracy has gone into reverse. It then looks at the global development financing within that overall context, and I’ll just highlight two features of the global development finance landscape here. The first is that net financial flows have gone into reverse, so more money is now flowing out of developing countries than is flowing in. That’s a combination of factors, including increasing interest rates, a new debt crisis and the movement of global capital to safe havens during the pandemic and since.

The second point to highlight is that although ODA is a relatively small share of different kinds of development finance, it’s still critically important for a certain group of countries, particularly the poorest, but also those affected by conflict. So, the fact that development finance is increasingly a constraint to further progress on development goals means that it’s important to understand what the, sort of, pattern and picture of that finance looks like, and we present that in the recor – report. We do that before we set what the UK’s finance looks like within that context, which is the mapping exercise that you will – you’ll find when you – when, hopefully, you will dig into it after this event.

I’m just going to highlight three of the trends that jumped out to us in doing the work. The first one is about how aid is spent, and we conclude – we see from the report that aid in – spent in the UK has increased significantly. And if I could have the first slide, please. There it is, well done. So, in 2023, half of bilateral UK ODA remained in the UK and most of that was spent on housing asylum seekers and refugees in the UK. And what you can see from this chart is that development spending has fallen well below the 0.7 legislative target, but if you look at the gap between the blue line, which includes spending on in-donor refugee costs, so housing and asylum seekers, money spent in the UK, that spending has fallen well below the 0.7 target.

Now, the government committed to reducing using overseas development assistance in this way. We are an outlier in relation to other OECD countries in the way that we do this, but there isn’t as yet a cap or a clear plan on how that will be implemented, against which we can scrutinise progress. And obviously, it shows how the – how this spending has then distorted the picture and presents some real choices to the government in the context now of cuts, of where it – what it spends in the UK and what is spent overseas.

So, if I can go to the next slide, please. We then – just to illustrate that – you know, where the allocations of aid spending have changed over the long-term and then quite sharply since 2020, funding to country programmes has reduced dramatically, from about 5.9 billion in 2019 to 2.7 billion in 2023. And this has often meant sharp cuts and quite abrupt cuts for longstanding partner governments. We can see that Ukraine is now the largest – at the top, as the largest recipient, that dark blue line that you can see there, and that cuts across the piece for other partners have been, indeed, quite dramatic.

The overall ranking of countries has remained relatively stable, and if we take out, as we do in the report, those programmes which are spent not by the FCDO, but by other government departments, we see a slightly different picture, with less emphasis on Africa and more focus on middle-income countries, rapidly growing middle-income countries, where climate change is a focus of investment there. So, there’s a lot more to dig into when you go to the report, but we see that that movement away from funding longstanding country partners, over time, has become quite acute.

That has also reduced the ability of the UK to respond to humanitarian crises. Many of you will be very, very familiar with this. So, pre-pandemic, about 14-16% of ODA was allocated to humanitarian response. It was halved in 2021. It’s bumped around a bit and gone up and down, but in 2023, it stood at 9%, and that has nonetheless, included some substantial responses for Afghanistan and for Ukraine, which again, you can see clearly there on the graph. We’ve also seen recent allocative choices which suggested there was an effort to rebuild capacity on humanitarian support. But that now also, will be something that the government will need to look carefully at in terms of deciding whether further cuts fall to bilateral programme supporting countries, that has already been sharply cut.

If I can go to the next slide, please. The cuts to bilateral programmes have happened while the UK has held to its international climate finance targets and also increased its use of UK development finance, increased its focus on UK development finance. So, that’s loans, investments and guarantees. Let me just start with a quick word on climate finance. The government reaffirmed its 11.6 billion commitment over five years, with significant payments still to be dispersed in 2025/26. And that raises questions, I think, about these fixed spending targets at a time of budgetary uncertainty, when choices are going to be further constrained by this backloading of finance for climate change. And it will require a, kind of, step increase in spending just at the time that the government is thinking of cut – is actually cutting again.

And then the slide that you see in front of you just illustrates, again, the sharp rise in investment in UK development finance under the broad umbrella of British international finance mechanisms. I’ve just illustrated it by showing the guarantee portfolio has grown very, very rapidly in three years. In a context where there’s an acute shortage of development finance globally, there’s been much more use of grant finance to leverage other forms of capital to try and fill gaps, and that, again, is a choice and it’s something that we will continue to scrutinise, as indeed, the government is faced with further choices and trade-offs.

I finish now, hoping that I’ve given you – whet your appetite and given you a sense of what’s in the report. There’s much more detail and nuance in there, but really, to underline where I started, I suppose, that we feel it’s really very critical to have very clear, transparent, rigorous information about where aid spending stands, and as the government will be facing choices. For us, as ICAI, looking at the impact of UK development spending also really depends on having clear strategic goals. The government will be looking, again, I’m sure, at strategic priorities and what it thinks the best impact can be gained from now limited resources. And we will be continuing to engage and look at what that means for both impact, so the – whether it reaches, and what is different, as a result, for the people it’s intended to reach, and also, what value for money does that represent for the UK public?

The report, as I said, highlights where some of these trade-offs will be from the current picture, and also, we would draw your attention to earlier ICAI reviews which highlight lessons from processes of – previous processes of cutting, which will, in some ways, be different now, as the context continues to be very volatile. But will also be very important, I think, for thinking about what happens in the future.

So, I know we’ve got a very engaged, learned and committed audience, and just want to thank you, again, for coming, for listening. I hope you will pick up, or take, a copy of the report and we’re very, very much looking forward to the discussion now and also, to engaging with you further over the course of this Commission. Thank you.

Dr Samir Puri

Jillian, thank you so much for laying out which such clarity, not only the contents of the report, but this overview, over what is actually a very complex set of issues, at a crossroads, I think, for UK development.

What we’re going to do with the event is we’re going to hear from each of the other speakers who are on stage, before we move to the audience Q&A. So, I’m going to come to Liz next, actually, one of the Commissioners at ICAI. Liz, please, if you would like to offer your own observations and reactions, also, to what Jillian has presented.

Liz Ditchburn

Thanks very much, and again, it’s great to see some familiar faces and really, really lovely to be here today. Many of the questions – as Jillian said, many of the questions that we will be looking at, as ICAI, remain the same, but my goodness me, what a difference a day makes for some of them.

So, we had thought – ICAI works in these four-year cycles and this is very much – this work that we’re presenting today is very much about creating a baseline for that so that we can come back and look at the end of that four year. And we had thought that one of the questions we would want to look at over the four years was the way in which the UK was thinking about its scale-up back up to 0.7. Obviously, that wasn’t expected, particularly within this Parliament, but we were thinking a government that’s thinking it’s scaling back up to 0.7 will be doing some things which are around planning for that, managing that, thinking about the capability it needs for that.

We’re clearly now in a very different world, where this government is going to have to be thinking about what the scale-down from 0.5 to 0.3 looks like and how you do that well. And we know that for value for money and for getting the best impact, which is what ICAI is here to scrutinise, how you make change really matters, and we learned quite a lot. I declare my past, I was one – I was a - the VfM Director in DFID at the time in which the UK was scaling up to 0.7. And I think during those times, we learnt quite a lot about what scale-up looks like, what a good scale-up looks like and where some of the risks are in that. And in the recent ICAI work over the last few years, in terms of cuts, we’ve learnt quite a lot about what the risks are in terms of scale-down and how you need to manage those risks. So, how change is done really matters and we’ll be wanting to look at that very closely over the next four years.

The second thing I think is it brings into even sharper focus, there was al – this question already existed, but it’s even in sharper focus now, what kind of role does the UK want to play? What kind of strategic choices is it going to make? As a, you know, as a really big, significant, 0.7 large economy donor, the UK, in a sense, could, kind of, do quite a lot of everything. It could be big in development finance, it could be big in humanitarian, it could be big in replenishments. It could – you know, it could be a sizeable player in all of these fields. So, in a sense, the choices were less sharply defined.

Clearly, as a smaller donor, that will be the situation as a 0.3 donor, those choices are much more constrained, and thinking about where does the UK want to specialise? What role is it thinking about explicitly? Where can it add the most value? How does it want to combine multilateral with bilateral? How does it want to play in the development finance space? All these are real choices, which are, I think, much sharper focus than perhaps they would’ve been in a 0.5 or a 0.5 growing to 0.7, world.

And then, the last point, I guess, is where are the constraints in those choices already? We – Jillian, you know, mentioned the in-donor refugee costs, which are just so striking, aren’t they? I mean, it’s hard to come into these numbers without being struck by the quantity of overseas aid which is actually spent in the UK. And, you know, so that’s – so, the big question I guess we don’t know yet – there’s lots we don’t know about what this 0.3 world will look like, but one of the questions is, how much of that 0.3 will be available for being spent in developing countries and how much of it will actually be spent in the UK? So, clearly, there’s lots still to find out and those are the sort of questions we’ll be looking at and keen to understand how the government’s thinking develops as it takes forward those plans.

There are some other, sort of, big blocks in the landscape, I guess, around what – well, the climate change commitments that have already been made, what will they look like going forwards? The IDA replenishment, which is already decisions made, some humanitarian priorities have already been talked about. So, I guess we’re all – we will be looking at this landscape and understanding where are the fixed points in it and how do you use the choice that you have in the rest of it? And does that all add up to a coherent strategy? Does that all add up to a coherent set of priorities, against which we then will be able to ask our scrutiny questions?

So, I think probably choice and strategy is going to be some of the key words that come out of today’s discussion. There are a real set of choices for the government to make and we will be looking at those choices through the lens of what does that mean for value for money, for impact, and for the change which is brought about by UK development spending? Thank you, Samir.

Dr Samir Puri

Thank you very much, and I’d like to now invite Harold, also a Commissioner at ICAI, to offer his comments and contributions, as well, please.

Harold Freeman

Thanks very much, and look, I had planned to use this slot as a shameless plug for the next ICAI review, which we are starting work on now, which is about the clean energy transition in the poorest countries. I decided to stick to the theme, but partly because I think it illustrates some of the challenges which Jillian and Liz have already spoken about. So, it’s very timely, not just because, you know, the challenges of climate change are, you know, a huge global challenge and something we need to cover, but also, I think three issues which are relevant to the current situation.

First, the way that the world has been going around – going about meeting the challenges of climate are, basically, predicated on a specific model of how you do that. That is, you identify the need, you look – you set goals, perhaps the Sustainable Development Goals, or the Millennium Development Goals, you work out some equitable burden sharing, and then you have co-ordinated implementation. And that model of going about things looks increasingly under threat from recent events, and, you know, without going into it, you can see you need to, kind of, ask your – ourselves, does that make sense, and how do you evaluate your strategy relative to that?

Second, from a UK perspective, because although we have quite a lot of aspirations set out there, and we have some announcement, we are still a way off having a clear strategy for – on climate and energy. And we, ICAI, when we look at – when we evaluate value for money, you start, normally, with saying, “What are the objectives? What are the strategy?” and then, you look at what has happened and evaluate what has happened relative to that. So, it’s a bit of a challenge. Clearly, we have, you know, we have the aspirations set out by the Foreign Secretary, the Global Clean Power Alliance, what he said in Kew Gardens. We have the reaffirmation of the commitment to 11.6 billion of international climate finance, made at the end of last year.

Those were already going to be challenges, partly because the money was very backloaded, which is set out in the report, and – but those challenges, clearly, have been sharpened by events of the last weeks and including events yesterday. And I think one lesson from the previous government and the previous attempt to cut aid spending is that there is always a risk that, absent a very clear overriding strategy, what you get is sequential decision-making and you end up, whatever happens to come last gets cut. Rather than saying, “What is the best value for money?” and starting for first principle. So, I think that’s something that we’ll need to be looking at very hard.

And I think the third message coming out of the report, and here, there’s some interesting material, I think, on page seven and some of the things, so I encourage you to look at the report, the private sector is not riding to the rescue. Even on areas on – like energy and infrastructure, where I have most of my experience, where normally you would expect the most, sort of, private sector bankable products – projects to be there. And there’s some good data in the report, there’s also some very interesting data that the World Bank put out at the end of last year about what’s happening in terms of flows to the poorest countries in the world. Where – and we’re seeing some bounce-back from the lows during the COVID period, but the bounce-back of financial flows to the poorest countries is almost all being driven by the World Bank and the multilateral development banks, and not by the private sector.

So, for those who were talking a decade or so ago about, you know, scaling up from billions to trillions, by leveraging in the private sector, I think the message which we’re getting from the data, and the data in this report, is that’s only going to happen with a lot of risk-sharing and institutional structures around it, from the public sector. We can’t expect the private sector to come to our rescue when money is short. So, those are my points, and I will stop there.

Dr Samir Puri

Harold, that’s fantastic. Thank you very much, and I’m now going to ask Olivia O’Sullivan from Chatham House’s UK in the World Programme to offer her reflections to what we’ve heard, and indeed, from the report, and some wider contextual points, as well, I think.

Olivia O’Sullivan

Thanks, Samir, and thanks very much to the Commissioners for joining us today. I mean, thought given that I’m somewhat unburdened by an official scrutiny role, I’d offer a few points on the report and ICAI’s points, but also the announcement yesterday and the wider global context. I’ll try to keep it short, because I can see in the room we have a lot of people with expertise, interest, engagement in this issue. I’d really like to get to your questions and hear your reactions. So, I think probably three points. Some reflections on the announcements yesterday, some reflections on this all coming in the context of the USAID shutdown and some reflections on other geopolitical players who will, potentially, move into, or not move into, this space and what questions we now have.

So, I think on yesterday, you know, to govern is to choose. I don’t envy the position that Starmer’s government are in. I think if you look at successive Parliamentary Committees, the state of our defence forces is worrying. The lack of readiness has been increasingly dire warnings about the lack of readiness. If you look at even existing budgets, things like the defence equipment plan, there are gaps of around 15-16 billion in that ten-year budget, between even what they’ve committed to and what they actually have to spend. So, there are gaps here and there are concerns, even when you think about just our existing plans, let alone the potential effect of the US retracting its traditional role in European security, which is the trend that we’re seeing.

And I welcome that they are trying to explain how they will fund this uplift. Everybody who’s been paying attention will know that we’ve actually had this announcement a few times, right? Previous governments have said they will spend 2.5% of GDP on defence, but have not set out what will change to pay for that or in what way they will do that. Nonetheless, given all of that, the shift of what looks to be about six billion from aid to defence is not going to plug even existing gaps, let alone help us address the transformative choices that will probably need to be made if the US is truly on the trajectory we think it might be on. And it will reduce an aid budget already diminished since 2020.

So, I think it still does defer many tough choices and as the panel have, kind of, made clear, and as the report makes clear, with a third of our aid spending going on in-donor refugee costs, on housing for refugees and asylum seekers, it puts the UK in a really diminished position in terms of our geopolitical goals. Around resetting relationships with the Global South, around it playing an important role in the, kind of, transformative economic growth in developing countries.

I think the second point I would make is the timing is – I don’t have to tell you on here, you know, couldn’t be worse in terms of the very dramatic shuttering of USAID, which I would say is really structurally significant. You know, 29% of all OECD – official OECD aid spending in 2023. The UK was about 8% in that year, I believe, even counting the stuff we spend at home on in-donor refugee costs. And, you know, any UN agency budget that you look at, consistently, the US is putting billions in to the, kind of, existing international post-war structures that were built to manage humanitarian emergencies and to put asset towards, kind of, global economic convergence. So, I think that’s really significant, and it leaves some really urgent gaps.

And the third point I would make is, of course, other players will face the space in different ways and in ways that align with their own geopolitical goals. China may be one, although China, of course, also is facing its own economic challenges and imperatives to invest in what it considers to be, sort of, domestic industrial and military capabilities. I think we obviously need to look at countries like Gulf powers, who potentially have surplus capital and have been playing more of a humanitarian aid role in their regions. But above all, I think this adds up to, you know, a need to, kind of, rethink the model long-term, which many people in this room will have committed to and will have thought about. I would only say that in doing that, I think we should not ignore some of the, kind of, urgent current gaps, particularly in the type of – the types of things the US funded, that was often the, kind of, basic healthcare emergency response.

So, I think there’s a, kind of, immediate, even with a diminished budget, role for the UK in looking at where are the priority gaps that could be filled? Maybe working with new partners. Maybe thinking differently about how we do that. Long-term, I think big questions about the aid model that we use and the role that the UK wants to play, which have been persistent, but yesterday makes them even more urgent. So, I’ll stop there and looking forward to hearing people’s questions and thoughts.

Dr Samir Puri

Olivia, thank you very much. So many important points from all the speakers on stage. Olivia’s point about widening the lens to potential new providers of development assistance also adds further to that changing global landscape around where development assistance is being offered.

So, we’re going to move to questions. So, just as a reminder, this discussion is on the record, it’s being recorded, it’s also being livestreamed. If you do want to tweet about this event, as we’re, sort of, going, please use #CH_Events or – and @ChathamHouse. When I pick on those who want to ask the questions, please introduce yourselves, keep your questions relatively succinct. Those of you who are writing questions in online, I’m going to try to fold some of these into discussion, as well. I am going to start the Q&A by first, inviting Marcus Cox, who’s sitting right here in the front row. Marcus, if you can – if we can bring the microphone down to the front row, maybe you can just introduce yourself and your – the role you’ve played in the report and offer a few initial thoughts and reactions, please. Thanks.

Marcus Cox

Of course. Thanks very much. So, my name is Marcus Cox. I’m a Director of Agulhas Applied Knowledge, and we lead the consortium that supports ICAI with its reviews, including this baselining assessment. We, of course, undertook the research and the preparation of this in a different world, as a baselining exercise, as we looked towards, you know, a spending review and what we hoped would be a, kind of, a rebuilding period for the UK aid programme. Obviously, different – very different context now, but I think that some of the trends and patterns that we identified in this report actually provide a very useful starting point as we look at this bigger question of, where now for UK development policy in a 0.3% world?

So, what I thought I would do is just very quickly point to a few of those patterns and trends that I think would be quite useful starting point for the discussion we’re about to have. So, the first one would be that over this turbulent few years that we’ve just been through, multilateral aid has been relatively protected, while the bilateral aid programme has steadily declined, and this is partly for pragmatic reasons. Multilateral contributions are harder to cut. They’re also quite useful in – to the government in managing to hit its aid spending target precisely each year. But the UK will now face some very important choices about which parts of the multilateral system it wishes to keep going, particularly in light of the withdrawal of much of the US funding.

The second point is that the UK has stuck to its international climate finance target, despite volatility in other parts of the aid budget. And if it chooses to continue with that position, then obviously, the 11.6 billion commitment that it made assumes a much larger significance in a reduced overall aid budget. So, we would see – expect to see climate action becoming even more central in the UK aid programme of the future.

The third point, as the Commissioners have pointed to, is that the government has been keen to maintain the space for humanitarian response and has signalled a continuing commitment to humanitarian action in Gaza, in Ukraine, in Sudan and various other locations. So, in some ways, the rise of climate finance and the importance of preserving space for humanitarian action would suggest diminished funding for other priorities, such as other SDG priorities.

The fourth thing is in – as the slide that Jillian put up showed, there has been some very dramatic cuts to the country portfolios to some of the UK’s traditional development partners. And as those are – the figures available for those deve – financial development partnerships falls, there will be either a very imp – significant – a con – reconsideration of what the function of a bilateral aid programme is, with much smaller resource envelope, or perhaps a geographical consolidation to try and rebuild the ticket sizes, whereby focusing in fewer geographies. So, geographical choices will loom large in the coming period.

And then, the fifth point that the Commissioners have also touched on is this shift towards the use of a diminished bilateral aid budget for leverage purposes. So, either through the UK’s development finance institution, BII, or through other kinds of leveraging instruments that mobilise the expertise of the City of London. So, as bilateral aid potentially declines, its function in security finance for the SDGs perhaps changes. So, those are five areas which I think we can keep an eye on in the coming period, as we look at the change – the choices that the UK makes. Back to you.

Dr Samir Puri

Yeah, thank you very much, Marcus. So, we’re going to start the Q&A and I’ll be taking a mixture of questions from in the room and also, from online, as well. Perhaps we can go to the gentleman right in the middle there, with the green lanyard, with his hand up, just there. Thank you.

Emmanuel Ereyi

Thank you very much. I think I’d rather stand. Thank you very much, and I think it’s…

Dr Samir Puri

Could you just introduce yourself quickly, as well?

Emmanuel Ereyi

Ah, my name is Emmanuel Ereyi. I’m a Writer, Commentator, a Host on Global Perspectives, and I find a number of the information you shared today very great. I think Olivia had made some very important points which I like to ask the question about and build on, as it were. If you listened to the Prime Minister yesterday, he talked about the 2.5 by 2027 of GDP he was going to spend on defence, and the Leader of the Opposition asked something about ‘new money’. “Where’s the money going to come from?” As a Journalist and as someone who observes, very closely, political and economic shifts around the world, I observe that in the UK, there are really no platforms to generate money by – in tech, which is ruling the world right now. Apple is in the US. YouTube is in the US. You can name them. Google is in the US, and just yesterday, Apple said it’s going to invest $500 billion in four years in the US.

And so, you talk about where new money will come from. I know there is tax and all that. So, I’m just – what I want to find out is, is anyone thinking in terms of where new money will come from? Because if you’re talking about plotting fund and funding, where’s the money going to come from? Yeah.

Dr Samir Puri

Alright, thank you. So, “Where is the new money going to come from?” I’m going to take another question as well. Perhaps we can come to the front row, here. The gentleman at the very front row has got his hand up. Thank you.

Anthony Dworkin

Thanks. I’m Anthony Dworkin with the European Council on Foreign Relations. So, you know, as you’ll all be aware, the trends that you’ve identified are not exclusively happening in the UK. We see similarly dramatic cuts in France, in Germany, in the European Commission, you know, as well as a, kind of, broader trend, I think, to look at development spending in a more strategic sense. And I’m just wondering if, you know, one of the responses to this much tougher environment is the, kind of, different approach to co-ordination of development spending with other international partners, and what that might look like, you know, given that probably the goals, you know, would be relatively compatible with European partners? Thanks.

Dr Samir Puri

Okay, thank you, and I’m going to roll in one question from online. Caroline Dilan has asked a connected question to Anthony’s, which is, “Any reflection on the wider cuts in neighbouring European countries and how this would obviously affect the UK and European approaches to SDGs and beyond?” So, if we can take those questions around, sort of, the other countries, and also, Emmanuel’s question about ‘new money’, where could it come from? Who would like to have a stab at either of those?

Liz Ditchburn

Well, someone’s got to start.

Olivia O’Sullivan

Okay.

Liz Ditchburn

On the – on this point around, what does change elsewhere in the landscape mean for the UK? I mean, I think it’s a really important question for the UK and I imagine people are thinking about it. I would hope people are thinking about it. I mean, because it comes back to the point I was trying to make about a smaller donor, in a sense, has to be more targeted in its choices and the best version of that is where there’s a division of labour. Where people have, kind of, worked out who’s going to lead in which – if it’s a geographical set of priorities, who’s going to lead in which countries? If it’s with respect to particular multilaterals, who’s going to lead on different things?

And I think in the past, we’ve seen quite a lot of that co-ordination, and we know it can work really well, and then there’s been periods where we’ve seen less of it. But it does feel like a really important set of conversations for the UK to be in, so that it can make its choices in the context of knowing how others are playing too, and to try and cover the needs as well as we can. But I guess fundamentally, there is a bigger set of questions around the role of ODA and how the world thinks about that and how that global development landscape develops. And so, yeah, this is just – this is a period of really big strategic thinking for all of these players and thinking about how they want to both shape that new world, but also respond to what’s happening. So, yeah, big sets of choices.

Dr Samir Puri

Okay, Olivia?

Olivia O’Sullivan

I would just add one thing to that, that I think the cuts in European countries I would view as pretty similar to the choices the UK has made, in that, you know, countries under fiscal pressure, who are worried about funding defence, find it politically easier to cut this budget than other things. The US cuts I would put in a different category, that is this is ideological. They’re not cutting aid to make it more efficient or to try to move money to other choices. They – this is a, kind of, if it continues and is permanent, a real retrenchment for a particular role that the US played in the world. And yes, there are legal challenges and there are Congress people, including Republicans, who, you know, are objecting and this kind of thing, but I think we should assume this is a statement of intent.

Whereas yeah, I think Europeans are in a fairly similar position here. So, there’s an obviously – there’s a, kind of, logical case for let’s try to co-ordinate and amplify it. I mean, I think as Liz said, in the past, co-ordination is challenging and it’s difficult, but I think that even that is, if you look at all of the budgets of European countries, just from a numbers perspective, and numbers and the amount you spend bilaterally is not the only important thing, probably not enough to fill the gap. So, I do think we still have this question of, are there other actors in the world that we can work with more closely or who are prepared to do more on aid?

Which actually comes to this point of, where can we get new money from? I – to – not to drop you in it, but I suspect Harold has things to say about this, because…

Harold Freeman

Yeah.

Olivia O’Sullivan

…well, because a lot of people have, historically, looked to the private sector. And there’s been this hope that if governments initially derisk investments, the private sector will come in, invest in things like green technology and climate transition. I think the pic – the evidence that we’re seeing is there’s a mixed picture of success there in terms of the amounts that would be needed. But I don’t think you’re wrong to ask the question of, if it’s not public finance, what is it, and where can we find other sources of funding or support for the kinds of economic and climate transitions that poorer countries need? But maybe you want to say more about that.

Harold Freeman

I can add a couple of points. Look, I mean, there are obviously some big fiscal questions which are way beyond this forum. I think in terms of the private sector, I think there’s some – you know, there’s a lot of interesting nuance in there. I mean, we have to remember that, yeah, even when you – if you look at the World Bank and the money that comes out of the multilateral system, I mean, actually, that does, in a way, indirectly come through private savings. So, corralled and structured in the right way, it can work, but it requires a lot of derisking, and I think that’s what we’ve learnt. And you risk ending up in a situation where, in fact, the public sector bears all of the risk and the private sector gets most of the profit, which is there in the excellent foreword to the World Bank Report on Development Finance from December, who – where their Chief Economist talks about the “dysfunctionality” and “broken international financial system.” So, if we want that process to work, there’s going to be a lot of work needed on the, kind of, governance and institution side.

Also, just – and this is more from my past experience, you know, I was on the Board of the European Bank for Reconstruction and Development, which was, you know, a new NDB set up at a moment of crisis, a different kind of crisis, of, sort of, a positive change, I guess, in the world. But, you know, there is a history of new governance structures and new institutions, kind of, being born out of sudden shifts in geopolitics. So, at a personal level, and I think this is beyond ICAI, wouldn’t surprise me to have – you know, if policymakers were not thinking about that. I certainly hope they are.

Dr Samir Puri

Okay, thank you, Harold. So, we’re going to take another round of questions in the room. Perhaps we might take the lady in the green, just on the end there, first of all.

Member

Thank you. I’m a former Social Development Advisor from DFID and I’ve watched the last few years of the slump in our ability to engage, with, well, I suppose, horror, I suppose. Disappointment isn’t quite close. And so, I think my question is to you, as the public sector, I’m not convinced by – and as I hear you’re not, about the other sources of money, whether we and those of you who are still actively involved in – within FCDO, how – we’ve heard other people already say this, that we seem to have lost our voice. I mean, I physically am, so I’m not going to carry on for too long. And I think it’s that notion of soft power, isn’t it? But it was the almost casual way which yesterday’s news shot out, which I think it – well, is – I can say this is – was dreadful.

And so, what would we do, as the public sector, not to lose that voice at – entirely and to recognise that an awful lot has gone away as the money – it’s not just that the money has gone, but the money – as some – I have done a lot of work in Ukraine and it’s not a poor country. And it’s that inability we have…

Dr Samir Puri

If I could bring it down to the questions. So, how not to lose our voice is one of the…

Member

Yes, is…

Dr Samir Puri

…questions there.

Member

It’s the voice has gone and the voice for poor people, too.

Dr Samir Puri

Fantastic. I’m going to take a few more questions. Maybe the lady just here, with the spectacles on, just in the middle with her hand up, right there. Thank you, yeah, that’s it.

Corinne McCrum

Hello, I’m Corinne McCrum. I’m an Advocate for the Sustainable Development Goals and I volunteer with Results. It’s a related question. So, the in-country spending on asylum sanc – asylum seekers and refugees is absolutely vital, but what we’re hearing is that there’s no oversight of that spending. So, it’s almost elastic how much is spent on that. Anecdotally, my sister-in-law works with refugees in Devon. Somebody needed dental treatment. A Dentist locally in Devon offered. No, they’re going to be transported to London in a single car. So, there’s spending on that, the whole day on this car, rather than letting the Devon Dentist do it.

So, the question is, is there hope for oversight, some kind of – on the in-country spending, so we can maximise the rest of the spending on development?

Dr Samir Puri

Thank you very much. I’m going to add an online question. Michael Harvey has asked something connected, which is, “What capacity is potentially available from other departments or the private sector to absorb the refugee costs incurred in the UK, rather than including them within the development and aid budget?” So, a different – slightly different question to the, sort of, oversight, but connected, again, to that spending here on the refugee costs. If we can take those three questions to begin with and then, we’ll take another round in a moment.

Liz Ditchburn

Shall I start with the in-donor…

Dr Samir Puri

Please.

Liz Ditchburn

…refugee costs? So, I think, you know, if you – well, there’s one choice that the government could make, which is to not – decide not to score IDRC as ODA in the way it thinks about its ODA targets. And of course, all countries choose how they want to set – both set a target and then manage to that target. And the UK is quite unusual in the system it has in terms of the target being a spot target, i.e., a, sort of, ceiling and a floor, so can’t be exceeded and can’t be undershot. And that does create a, sort of, set of dynamics and incentives around spending.

So, if in-donor refugee costs are to come down – so let’s put to one side the question of whether they’re scored or not, if they’re to come down, which is what this government has said it’s very, very keen to do, then you’re looking at the cost per asylum seeker and you’re looking at the – and the absolute numbers. And we’ve heard, kind of, quite a lot about the backlog needing to come down, but of course, it’s not just the backlog that will impact on the total cost going forward in different years, it’s the levels of inflows, as well. So, cost per asylum seeker, which the UK does appear to be unusually high compared to other countries, which maybe – and, you know, bears out some of your anecdotal experience, but obviously, there’s q question of numbers, as well. And so, I think all of that is clearly in the mix and how it interacts with the ODA target is clearly in the mix.

There are three places where scrutiny comes from on this set of budgets. Well, actually, probably more than three. But in terms of, sort of, sources of evidence, there’s the NAO, who obviously look at expenditure through the Home Office and others. There’s the Chief Inspector for Borders and Immigration, who also looks at this in terms of one of the aspects of Home Office operation that they look at, and then, obviously, we have a role, too. And I think what we’re interested in is how – and we’ve had good discussions with all of these bodies, to think about, how do we all combine our forms of scrutiny? ‘Cause we all have, sort of, different angles on this that we’re – I mean, we’re not in – we’re not well placed to look at the nuts and bolts of the efficiency of the spend and how that’s managed. The NAO is far better placed than us to do that, but we’re well positioned to think about the impact on other development priorities and how it flows through the target management. And then, obviously, Borders and Immigration Inspector has a real detailed knowledge of the operations.

So, I think the prize is for all of us to, sort of, work together to bring our different elements of scrutiny together, to make sure that the information is available to Parliament and to others who want to hold the government to account.

Dr Samir Puri

Fantastic. Olivia, you wanted to add something to this?

Olivia O’Sullivan

I – well, I just did want to make one point on scrutiny, which this, kind of, zooms out from your question, if that’s okay. But, you know, given the choice that was made yesterday, I think it is critical that we keep in mind there is intensive scrutiny on the aid budget, helpful and unhelpful. And the – that level of concern for waste and poor procurement or the potential for fraud, should be applied to any uplift in defence spending or any, in fact, existing defence spending. And it – there is scrutiny on defence spending, Parliamentary Committees, the NAO, but I think we don’t want to find ourselves in a political moment where we are raising defence spending to hit a particular percentage point target without careful thinking about what capabilities that needs to produce, to contribute to the safety and security of this country and of Europe, that the government is worried about.

So, I just wanted to underline your point about scrutiny, because it applies also, I agree, to the spending by the Home Office, which, you know, was not subject to the same kind of accountability structures and scrutiny as ODA spending via DFID or via the parts of the FCDO that spend ODA. So, that is certainly one thing I think we need to keep in mind in this political moment, where there is a push to increase defence spending, is that we need to look at what that is actually – what kind of outcomes that is producing for us, in the same way that we put scrutiny on the type of outcomes that aid spending leads to.

Dr Samir Puri

Thank you, and I should also add that the lady’s question about, how do we maintain our voice, is arguably, sort of, an undercurrent question to much of this entire discussion, actually, which is an important point to keep in mind. What I’m going to do is read a couple from the online contributions and then, take some more in the room, as well. Following on from Olivia’s point regarding evaluating the outcomes and the value, Andrew Lawday has asked, “How might ICAI judge the security value of development aid ODA? Is it a credible hypothesis that ODA enhances Britain’s security more surely than its large defence spending?” So, that’s – I’m going to take a couple from online, so please note that one down from Andrew.

I’d like to bring Sigana Janeja’s question, “Does the panel think the UK will specifically prioritise Africa in their international development work during these cuts, both humanitarian and development?” Just thinking, of course, about the breakdown of where the major recipients actually are, but where might Africa feature in, sort of, the medium-term of this, with this big set of realignments?

Gordon Cumming has asked a very simple question, or very precise question, rather, very complex question, is, “Are the SDGs now dead in the water?” ‘Cause when I was reading the report in reference to the SDGs, I, sort of, thought, well, there’s a, kind of, a bit of a blast from the past. We all know the era that they came from, it’s a very different era. Is that one of the, sort of, contextual points here that the era this has come from is now so far in the distance? And Penny Davis has asked, “Do you think large private philanthropic foundations are becoming more important grant donors, and what does this mean for the kind of conversations on co-ordination the UK should have?”

So, if you can take a selection of those and I will come back into the room. So, please, take them as you wish.

Jillian Popkins

Okay, thank you. That’s a really rich set of…

Liz Ditchburn

It is.

Jillian Popkins

…questions.

Harold Freeman

It’s good, yeah.

Jillian Popkins

I’m going to start with the SDG ones, ‘cause I noted it down earlier when we were talking about questions of co-ordination. I think it links in, and I was remembering when Gordon Brown, in about 97, wrote a paper called, “The Rules of the Game” for the IMF, which was really calling for – I think it was in advance of the MDGs, the Millennium Development Goals, and really calling for a greater level of co-ordination of objectives across the world. Because, of course, that is the way in which, as Liz has described, different actors came in behind shared objectives, playing to their advantages in a co-ordinated way. Whether that was in a geographical context or whether it was to deal with a global issue like health or education, for example.

So, this question of, you know, what now for the SDGs? I think it’s really important to remember the diversity of perspective and views on that. So, we might not be talking a lot about the SDGs here in London and in the UK, but I’m sure that they would be featuring much more heavily, excuse me, if we were having this conversation in Sub-Saharan Africa, for example. They are global goals, they are owned by all of the countries in the world, and so, I think, you know, they – it will be – it’s a really good question and it will be really interesting to see how countries of the majority south look to the next generation of global goals and what they expected from partnership from other regions and other players, as Olivia mentioned in the context of that.

In terms of prioritising Africa in cuts, I mean, I think it’s a very good question. I think we have seen – the report shows that there – that – sort of, what the trends have been and the focus on bilateral aid going to poorer countries in the UK. So, you know, we can see that trend. Whether that trend will remain, remains to be seen. And as Marcus or Howard, I forget which, said earlier, whether that climate will increasingly play a part in that funding to Africa, we will also see. They’re very good questions, I think, over the longer-term.

But maybe I’ll stop – oh, philanthrapic – philanthropic donors, really important. I mean, they play a very particular role in the development landscape. They obviously have a lot of flexibility. So, they’ve led the charge in terms of participatory grant making, in terms of funding the movements from the Global South, and many of the movements who’ve been particularly hit by the shuttering of USAID, as well. So, a really important part of the picture, which, you know, thank you for raising, because it mustn’t be forgotten. But again, in the context of broader co-ordination, I have seen philanthropic donors talking about the need, themselves, to co-ordinate more in response to these changes. So, will be really important to follow, too.

Dr Samir Puri

Jillian, brilliant that you could cover such a wide range of questions there. Would you like to – would like to add any other points…

Jillian Popkins

As I said…

Dr Samir Puri

…to these?

Jillian Popkins

…I’m going to pick up something on prevent – on, sort of, the really high-level value for money question that was asked, I think, by was it Andrew, around the security value of development spend. And I think, you know, on an absolutely, sort of, you know, generic high level, we do obviously know that prevention is generally treaper – cheaper than treatment, or than addressing an issue. And whether that’s conflict or whether that’s health, or – you know, it applies in many, many contexts. I think we have a really interesting role, as ICAI, but, you know, many other people in this room, too, to make sure that the evidence about that is really clear and understood and articulated and assessed. Because it’s a, sort of, thing that’s very easy to say, but we need to translate it into, sort of, I think, you know, digestible evidence and real implemat – implementable change.

Like Howard, I’m going to give a shameless plug to a review which we’re kick – we’ve – which we’ve kicked off, which is on Sudan. And one of the things we’re really interested in Sudan and why we’ve chosen Sudan, not only, obviously, because of the absolute, kind of, criticality and urgency of the situation, but also, because it’s a really interesting way to look at how the UK is working development and diplomacy together and where that’s been effective and where we might have some findings that suggest how it could be improved. And I think, you know, one of the questions we’re asking is, were there missed opportunities where greater action by a range of players, not just the UK, but including the UK, could have prevented some of the way in which the Sudan crisis has played out? And therefore, lead us with less – you know, obviously, the financial demands that have – responding to the scale of the crisis now is really significant.

So, I think that’s just a, sort of, live example of whether there is – there’s learning from the past that we can draw in terms of missed opportunities or things that could have been done. But this question of, how do we get under the skin of what’s easy to say, but really needs to have evidence applied to it and be done in a way that – could be offered in a way that governments can take into policy thinking? Thanks.

Dr Samir Puri

Yeah, thanks.

Jillian Popkins

Do you want to add?

Dr Samir Puri

I was going to see if whether we can very quickly get one more question from inside the room. I’ll – I’m so sorry if I don’t get to take your question. We got about two dozen online. I’m going to pick one really at rand – the gentleman right at the front here has been very patient, in the blue jumper, here. Please make it quite succinct if you can. We’re running out of time.

Sahil Shah

Sure. Sahil Shah. Many ODA recipients pay far more in debt interest, let alone debt repayments, than they receive in ODA. What can Britain do when it comes to reform of sovereign debt repayments, right through to the multilateral system, things like the IMF, SDRs, the mobilisation of the RST, etc.? I’m curious to your thoughts, ranging from debt forgiveness, right through to debt pauses, debt restructuring.

Dr Samir Puri

And let’s take that question, ‘cause we’ve probably got a minute and a half or so to, sort of, mull over that one. So, who’d like to take that?

Jillian Popkins

It’s Harold.

Harold Freeman

Thank you. Look, it’s a really good question and actually, there is more detail in the report and more detail in our thinking about precisely these issues. It is clear that we have rumbling in the background a pretty serious debt crisis and not just a liquidity crisis, but a solvency crisis in some of the poorer countries in the world. And I guess I was involved from way back, way back, in the previous round and saw some of the challenges that were there. At that time, so 20 years ago, there was a feeling that better co-ordination and particularly, kind of, collection act – collective action clauses, sovereign debt restructuring mechanisms, would come into play and would make all of this stuff much easier. But actually, the opposite has happened, because we’ve had a fragmentation of the creditors in the private sector, but also sovereign creditors, as well, with the growth of new things.

So, I think it’s going to be really hard, but I also think it’s going to be inescapable and, you know, that there is some kind of resolution to this. And I’m guessing it’s not going to be immediate, but I can see in the coming years, and I suspect this is something that ICAI’s going to have to look at, that, you know – some serious thought about how we do this better, and so – but – ‘cause we don’t have the solutions now and it is a coming crisis.

Dr Samir Puri

Harold, thanks very much for that answer, and we had – we answered about a dozen questions. We had about three times as many, including online and in the room. I’m so sorry if we didn’t get a chance to take your questions. We are moving to a coffee break, where we can carry on the conversation. So, if you did have a question you wanted to ask or discuss further, there is still further opportunity. But if we can just take a moment to thank our guests from ICAI [applause].