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Last year more than 83 million people in low and middle income countries were affected by natural disasters. We may not know when or where the next disaster will strike, but we know it will. So why do we still treat disasters like surprises?
International appeals are generous, but they are usually launched only after disaster strikes, and funds and supplies are slow to arrive. A new CGD report urges a different approach: make disasters predictable. The report looks at how we can pre-arrange disaster response funding using the principles and practices of insurance, so that countries get the money as soon as they need it and donors actually pay less in the long run.
We launched the report at a recent CGD event with working group co-chairs Stefan Dercon—Chief Econmist at DFID, professor of economics at Oxford Univeristy, and co-author of a book called Dull Disasters—and Owen Barder, CGD vice president and director of our Europe program. They were joined by two members of the working group: Alice Albright, head of the Global Partnership for Education, and Rowan Douglas of insurance group Willis Towers Watson.
Today's podcast brings you a flavor of that event.
On May 7, French voters will elect their new president—right-wing candidate Marine Le Pen or centrist Emmanuel Macron. France is a leader in development-friendly policies—currently ranking fourth on CGD’s Commitment to Development Index (CDI) and the highest ranking G7 country. So what will France’s choice mean for international development?
On April 23, the French people turned their back on the established parties and ended the dominance of the two main parties. Both candidates, Republican candidate François Fillon (19.9%) and Socialist Benoît Hamon (6.4%), failed to make their way into the second round. In the runoff vote on May 7, the French people will choose between two candidates with entirely different visions for France and the world: nationalism and protectionism versus globalisation and solidarity.
Here we look at what each presidency could mean for international development, especially overseas aid. As the electoral campaign has been dominated by discussions on the European Union, the economy and immigration, we also analyse their suggested trade and migration policies.
French aid and trade policies under the new president
The election of Marine Le Pen would not only be a blow to the European Union and the Euro, as she is open about her plans to renegotiate the country’s membership and pull out of the currency union, but it would also have significant implications for overseas aid.
If Le Pen seeks a new, highly-reduced role for France in Europe, it would also increase the pressure on the EU’s aid budget. Le Pen expressed support for the 0.7 target in an interview with the Le Monde Afrique. She justifies her support with the goal of reducing migration to France. As national security issues serve as the main driver for her aid spending, we might expect more aid to be spent directly through French development agencies, rather than through multilateral agencies like the European Development Fund and World Bank. Delegating aid through multilateral agencies can be an effective way of reducing administrative burdens on recipient countries and thereby increasing the quality of aid provided. As the CDI indicator for aid quality (QuODA) already penalises France for its relatively low support for multilateral agencies, it remains questionable that French development assistance would become more effective.
Despite her generous commitment to the 0.7 percent aid target, by increasing the burden for foreign products to gain market access in France, Le Pen’s isolationist trade policies would harm poor countries profoundly. In terms of foreign policy priorities, Le Pen emphasises France’s role in francophone Africa. Her main areas of focus are education (mainly primary school), agriculture, and defence and security (see provision 124 of her manifesto). In addition, she would focus on the empowerment of women, especially in the Sahel. In general, we judge prioritizing aid in strategic areas by intensifying the old ties with francophone African countries, where France already has a strong presence could be positive. As laid out in our Quality of ODA (QuODA) assessment, donors can have a greater impact by promoting development in countries where they have a revealed comparative advantage. However, Le Pen also proposes to abolish Free Trade Agreements and promote French agriculture and agricultural exports (provisions 126-130). As she wants to cut imports significantly, French policies would shift from an ‘aid for trade’ to an ‘aid, no trade’ approach. However, boosting subsidies for French farmers will not only lead to (more) overproduction and distorted prices on the world market, it will also exclude producers from developing countries from global market access, thereby limiting their economic opportunities.
In the introduction to his six chapter manifesto, Emmanuel Macron promises to seek a policy of peace and an entrepreneurial spirit in Africa. While he might be a political outsider without the support of an established party, his policies are not “anti-system” like those of Le Pen. He is an open supporter of globalisation and of France’s participation in the international system. Although his program is focused on France and the European Union, Macron has laid out his vision for France’s international development in a questionnaire put together by the platform Coordination Sud, which represents more than 170 NGOs in France. Macron commits to the 0.7 percent aid target and—like Le Pen—wants to prioritise French bilateral aid spending on Africa. He also commits to support Least Developed Countries (LDC). This would be a strong signal for the 29 other countries that give aid (as members of the DAC), as it would reverse the recent drop in spending for the poorest nations. His aid priorities are education, health, the empowerment of women and sustainable development, in line with his public support for the 2030 agenda.
Nevertheless, Macron has called for higher tariffs to protect the European industries. Whilst the poorest countries avoid European tariffs altogether through the EU's trade approach, the move towards protectionism is unhelpful for development, and European consumers, and he should rethink his approach.
Immigration was one of the main topics of the French presidential campaign. Not surprisingly, Le Pen’s migration policies would not help developing countries: instead, once elected president, she would aim to cut the annual legal immigration to 10,000 (compared to more than 160,000 in 2014). In one of the biggest economies of the world, not only is the feasibility of this reduction in question but also the effect on developing countries would be damaging. Such a significant reduction would essentially halt the inflow of migrants to France. As CGD has shown, migration is one of the most powerful tools for poverty reduction and income redistribution. Workers migrating from poor to rich countries enhance their host country’s economy and public services. They also earn substantially higher incomes, access knowledge and gain valuable skills. By sending back billions of dollars each year, these workers continue to support their home economies significantly.
Macron does not emphasize migration much in his manifesto, which in times of vast anti-immigration sentiments is a statement in itself. One of his priorities would be to further increase employment rates from ‘quartiers prioritaires’ or priority areas, which often accommodate a large number of immigrants. This is a good sign for France’s integration policies which lag on labour integration and mobility. Or as MIPEX, which assesses integration policies as part of the CDI, puts it: “France restricts and delays labour market integration more than most countries, with an estimated 5.3 million jobs 'closed' to non-EU immigrants and few accessing education or training in France.” Although he presents himself as a strong advocate for the fight against illegal migration and is a dedicated supporter of migration agreements, he does not want to tie aid to developing countries’ migration policy. His willingness to disentangle foreign aid from migration objectives (mainly limiting migration flows to France) deserves credit as this makes sure that aid reaches the poorest, irrespective of the willingness of their policymakers to cooperate with European leaders on migration issues.
France’s future International development policy: an instrument of nationalism or true solidarity?
Interestingly, by openly supporting the 0.7 percent target, focusing aid on Africa’s most fragile contexts, supporting basic rights such as access to health and education services, and promoting women’s rights, Le Pen and Macron seem to have comparable priorities in international development. However, the similarities end there.
The election on May 7 will also determine the self-image and understanding of the French development policy. Will it become a tool of national security and migration policy or an investment in international well-being and an advocate for countries’ stability, peace, and prosperity?
By justifying the 0.7 percent target with national security concerns, aiming to halt migration, and by supporting protectionist economic policies, Le Pen’s policies will not only have a negative impact on developing countries, but will also cut off France from all the opportunities international development brings, such as the benefits of free trade and international migration. On the contrary, Macron seems to be committed to development not only by his support for better and more open migration policies, but also through his vision for France to embrace the 2030 agenda. If elected president, he could further prove its commitment to development both on an international and national level by pursuing free and fair trade policies.
A commission led by the UN's special envoy for education, Gordon Brown, is calling for a doubling of global aid for education, without any clear reform agenda to raise learning levels in the world's failing school systems. That might be ok: bad schools in poor countries still seem to produce big benefits.
Last week the Center for Global Development hosted a panel with three heads of state vying to raise money for three rival education funds. Former UK prime minister Gordon Brown and former Tanzanian President Jakaya Kikwete were there to pitch a new entity they want to set up called the International Finance Facility for Education, aka IFFed, which they're billing as an analog to the widely celebrated Global Fund in health.
Awkwardly, something "like the Global Fund but for education" already exists, and its board chair was also on stage in the person of Julia Gillard, former Prime Minister of Australia, representing the Global Partnership for Education (GPE), which is also looking for money to replenish its coffers. Luckily, they seem to have agreed on a way to carve up the education landscape:
Brown's proposed fund, the IFFed, would serve lower middle-income countries, allowing them to borrow for education at concessional rates.
Gillard and GPE will continue to focus on low income countries with grant money. (Though, awkwardly again, the IFFed's list of "pioneer countries" also includes a number of low-income countries from the GPE's list, like Chad, Congo, Ethiopia, Malawi, Mozambique, and Tanzania. Why do we need a new organization again?)
And lastly, UNICEF's new "Education Cannot Wait" fund—represented on the panel last week by Tony Lake, UNICEF's Executive Director—will serve the true bottom of the pyramid, so to speak: refugees and displaced people.
Now, if only there was any money to divide. Aid budgets are tight these days. All the panelists were members of the U.N. Commission that Brown chaired on financing the U.N.'s Sustainable Development Goals for education. And the one thing all the panelists agreed on was that much more money was needed, both in aid and in domestic spending in developing countries.
Money probably won't improve school quality
Nobody on the panel had any appetite to talk about politically difficult education reforms that might turn money into learning.
Indeed, rather than focusing on the UN's new global learning goals, Gordon Brown and colleagues have shifted their focus to global spending goals. That's a very different conversation: in the unlikely event large amounts of new aid money are forthcoming in today's political climate, they're far from guaranteed to produce learning outcomes.
This is something of a departure from the text of Brown's Education Commission report, which dives deep into data and current literature on how to achieve learning for all. It bemoans the 'learning crisis' in many developing countries, reviews effective interventions to overcome the crisis, the need for more and better learning assessment, and notes that more spending often isn't the answer (see Figure 1 which shows Vietnam's high performance and low spending, and the inverse spending-performance relationship in a sample of Pakistani districts). Even as it turns to the question of finance, the report focuses on innovative mechanisms to incentivize reform and a stronger focus on learning.
That was the bait, now comes the switch. In the very last chapter the report turns to its "ask", tallying up why the world needs to raise education spending by $200 billion a year. And in the public discussion of the Commission's work, it's those spending goals—not all the careful analysis of reforming school systems—which now dominate the conversation.
Throwing money at failing school systems is welcome, but unlikely to work. A vast body of research questions the link between education spending and learning outcomes, and some of the best micro research on interventions to improve learning focuses on things that cost zero money, or even reduce education budgets.
In a review of programs to raise learning in the developing world in the journal Science, Michael Kremer, Conner Brannen, and Rachel Glennerster reach a conclusion broadly at odds with the push for money first:
[A]mong those in school, test scores are remarkably low and unresponsive to more-of-the-same inputs, such as hiring additional teachers, buying more textbooks, or providing flexible grants. In contrast, pedagogical reforms that match teaching to students’ learning levels are highly cost effective at increasing learning, as are reforms that improve accountability and incentives, such as local hiring of teachers on short-term contracts.
The things that Kremer et al say don't work are precisely the things the Education Commission is budgeting an extra $200 billion in global spending to expand. In contrast, the promising reforms that the authors describe here tend to have two things in common: first, they're often quite cheap, or even free; and second they're politically difficult.
But bad schools still seem to produce good outcomes
While the research literature shows a weak link from money to learning gains, it also shows that education in the developing world has amazingly high returns. This is paradoxical. We know that learning levels in poor countries are abysmally low. In an earlier post, I showed that in half of the fifty or so developing countries where we have data, fewer than 50 percent of women who left school after fifth grade could read a single sentence.
Sending kids to school has huge social returns, particularly for girls. Not only are the wage returns to a year of schooling generally estimated at around 10 percent per annum, but more educated women have fewer children and their children are less likely to die. This is somewhat puzzling if school isn't even teaching them to read.
In a background paper for the Education Commission, my colleagues Mari Oye, Lant Pritchett and I show the relationship between girls' schooling and outcomes like women's fertility and their children's survival is significantly higher where schools produce more learning. The correlation between a year of schooling and child survival is roughly two-thirds higher in countries with the highest versus lowest level of school quality.
Looking at the individual level data, women who completed six years of primary schooling had roughly 0.6 fewer children than women with no schooling, and those children were about 5 percent more likely to be alive. But if you focus only on women who went to school and didn't even learn to read—i.e., women seemingly failed by bad schools—they still had about 0.25 fewer children and their kids were still about 2 percent more likely to be alive.
To be clear, these are nothing more than correlations. You can think of lots of reasons more schooling might be correlated with lower child mortality absent any causal mechanism. But there's growing evidence to suggest the return to schooling is indeed causal, based on natural experiments and policy reforms in places where enrollment has expanded in systems that produce fairly dire learning outcomes.
So maybe pouring more money into business-as-usual and low quality education isn't such a bad investment after all.
Counterfactuals: if we spend more on education, what do we give up?
Fine, perhaps the world needs more bad schools. The world needs lots of things. Is bad education a better bet than, say, HIV drugs or famine relief?
The most intriguing part of Gordon Brown and co.'s pitch is the claim that they can create "new money." The plan is a bit of financial engineering to stretch aid dollars further:
Start with a couple billion dollars of good old-fashioned aid money
Add a couple billion more dollars of loan guarantees from rich countries to Brown's new IFFed fund.
Use that money as collateral to borrow on international capital markets at low rates, thanks to the backing from major donor countries.
Re-lend to poor countries so long as they promise to spend on education.
The basic idea, which is a good one, is to as rich countries unwilling to part with much cash during an age of austerity, to lend their credit rating instead. The problem is, it's not an idea unique to education advocates.
Recently, my colleagues Nancy Birdsall and Ngozi Okonjo-Iweala proposed a new, "Big Bond for Africa" in which rich countries would use their aid budgets to borrow at low rates and lend onward to African countries on concessional terms to pursue whatever development needs they want to prioritize—education or other. And my colleague Michele de Nevers and colleagues, including the former treasurer of the World Bank, Kenneth Lay, have proposed a Tropical Forest Finance Facility (TFFF) that would borrow from rich countries to create essentially a large endowment whose returns would fund forest conservation. There's no escaping the fact these are rival initiatives.
As that old bumper sticker used to say: "It'll be a great day when the schools have all the money they need, and the Air Force has to hold a bake sale to buy a new bomber." If the Trump administration is seriously weighing a new MOAB bomb versus a global fund for education, I'm all for the latter. Sadly, that's not the actual trade-off faced in foreign aid spending conversations in the era of Trump and Brexit.
When aid budgets are tight, advocating for one specific sector like education isn't a question of generosity or a moral crusade, it's essentially just a zero-sum game of earmarking a fixed budget. If that's the game we're playing, education advocates can't duck the conversation about how to generate the biggest learning gains at the lowest cost.
But they will still try. As moderator, my colleague Amanda Glassman opened last week's event with a brief statement about the need for improved efficiency and quality in global education. The panel was unimpressed. When her turn came to comment, Julia Gillard of GPE confessed, "while you were giving your speech about efficiency, Gordon leaned over to me and whispered, 'Yes, but we need more money too.'"
This blog post has been updated to include a correction. The International Commission on Financing Education is led by the UN’s special envoy for education, but it is not a UN commission, as originally stated.
Happily, in the last 25 years, the proportion of people living on less than $1.25 a day has dropped by two-thirds. Most of this success is due to major global forces such as trade and cross-border labor mobility. And much of the credit goes to the governments and citizens of developing countries themselves for pursuing the policies that have enabled donor, private sector, and (increasingly) their own resources to translate into development outcomes. But development assistance—including US aid—has made important contributions.
This annual report marks two milestones in 2016: CGD’s 15th anniversary and, at the end of the year, its first leadership transition, with founding president Nancy Birdsall being succeeded by Masood Ahmed. In this first era, the Center has established itself as an influential voice in international development policy, with a unique model of nonpartisan policy innovation.
Attention UK political parties: we know you are pretty busy right now, what with Prime Minister Theresa May calling a snap general election in a few weeks. So, we wrote an election manifesto on development for you. Feel free to plagiarize it; in fact, we’ve written it so you can just copy/paste parts of it if you want. To M Macron and Mme Le Pen, your manifestos are written (and here's what we think), but you will find some good ideas here too. Needless to say, not all our CGD colleagues will agree with all our ideas, nor will many readers. So please let us know what we have missed or got wrong, in the comments below.
This piece was written with significant input from Owen Barder, Hauke Hillebrandt, Anita Kappeli, Joanna Macrae, Maya Forstater, Lee Crawfurd, and Caitlin McKee, our colleagues at CGD Europe, based in London.
Britain’s unique role in the world
We will ensure that everyone in the UK can be proud of our role in the world, taking steps that will benefit UK citizens for generations to come.
Britain is a small country with global influence. We are the sixth largest economy in the world. We are among the world’s leaders on the environment, international development, and ending modern slavery. We are the only advanced country which meets both the international commitment to spend 2 percent of national income on defence and 0.7 percent of national income on development, and our armed forces and development programmes are admired the world over.
We are leaving the European Union because we want to control our own future, not because we want to retreat from the rest of the world. Britain is at its best when we trade freely, cooperate voluntarily with others to solve international problems. We will continue to lead the world in finding fair solutions to issues like extreme poverty, financial stability, international taxation, human rights, human trafficking and modern slavery, the environment, migration and refugees, drug resistance and pandemic disease. These actions will benefit UK citizens today, and for generations to come, by helping to shape a safer, fairer, more prosperous and sustainable world.
Britain’s international development policies are aimed at meeting the Global Goals for Sustainable Development agreed in 2015. As well as our effective aid programme, we will implement policies across all of government to help achieve these goals.
Aid policies for the 21st century
In every year of the next parliament we will spend at least 0.7 percent of gross national income (GNI) on overseas development assistance (ODA), according to the internationally-recognised definition agreed by the OECD; and we will spend 2 percent of gross domestic product (GDP) on defence.
We will maintain our aid spending because the UK lives up to it promises, but more importantly because foreign aid saves lives and helps the world’s poorest people.
This aid must be spent in the most effective way. We owe that to the people who need the aid as well as to the British people who pay for it.
We will take risks, and some aid programmes will fail. That is the price of trying to succeed, and the good that is done by successful projects far outweighs the costs of failures. But we will ensure that we learn lessons from every aid programme, whether it succeeds or fails, so that we can do better the next time. We will continue to have zero tolerance of corruption and waste.
The primary goal of British aid is to put itself out of business: we all want a world in which foreign aid is no longer needed. This requires investments in education, jobs and growth, reducing conflict, and promoting the rights of women and girls and good government. In the shorter term, aid provides a vital lifeline to the poorest and most disadvantaged people, providing health care, food, water, sanitation, and other vital services.
We will take a new approach to aid spending, fit for the 21st century—first, transforming the system and second, refocusing aid for maximum impact.
Part 1 - Six reforms to transform the aid system
To transform the system that allocates aid, we will undertake six reforms which add independent scrutiny to ensure our aid is effective and give taxpayers and Parliament a greater say in how and where our money is spent. The six reforms are:
1. A National Institute for Development Effectiveness to assess what works
We will be guided by what works. We will establish a National Institute for Development Effectiveness (NIDE), modelled on Britain’s world-leading National Institute for Health and Care Excellence (NICE), which will issue public guidance about which interventions have been proven cost-effective in rigorous, transparent, impact evaluations such as randomised controlled trials, supported by open data. Additionally, NIDE will provide a summary of the effects on women and girls of each programme that it analyses. NIDE will also assess all aid programmes against the benchmark of direct cash transfers. From 2019 onwards, we will not invest more than £10m of bilateral aid in any programme that has not been assessed by NIDE, and we will only invest in programmes that have been demonstrated to benefit women and girls at least as much as men and boys.
2. A stronger Independent Commission on Aid Impact
To enable it to provide independent advice to parliament on the results being achieved by UK ODA, we will double the resources of the Independent Commission on Aid Impact, and to ensure its independence we will transfer responsibility for budget and appointments to Parliament's International Development Committee.
3. Coherence and accountability for development across all of Government
The Department for International Development (DFID) will remain a separate government department, headed by a Secretary of State for International Development. They will chair a new Cabinet Committee, supported by the secretariat of the National Security Council, to coordinate aid spending and other policies across government, and will be accountable to the Prime Minister and to Parliament for overall value for money, transparency and coherence of Britain’s aid spending and policies affecting international development. The Committee will develop, publish and oversee the implementation of whole-of-government strategies for each priority developing country, replacing country strategies developed separately by individual government departments.
4. Tough love for the multilateral system
Britain will continue to champion a rules-based, legitimate, efficient multilateral system. But some of the world’s most important institutions are not fit for purpose and we will be uncompromising in driving reform, working with others. Multilateral institutions will benefit from earned autonomy: we will give more money and freedom to organisations that have earned the trust and resources of British taxpayers. Where agencies are completely transparent, so that money can be followed from top to bottom, and their programmes are demonstrated to be good value for money by independent, transparent, rigorous impact evaluations, we will provide more core funding. For organisations that have not yet demonstrated their impact and value for money, we will enter into tightly-specified results agreements as a condition of core UK funding, with a substantial part of the funding provided only when results have been demonstrated. For the least effective institutions, British contributions will be earmarked, not core, and closely linked to an agreed programme of organisational improvements and results. Organisations in this last group that do not improve within three years will cease to receive money from the UK government. We aim to increase multilateral aid, i.e. core funding to demonstrably effective multilateral institutions to at least 50 percent of ODA (from 42 percent now), as and when their performance merits it, while reducing the proliferation of so-called “multi-bi” earmarked programmes such as trust funds to less than 5 percent of ODA (from 20 percent now). This will be a significant improvement in the effectiveness of British aid, 64 percent of which is currently provided as bilateral aid, much of which is going to multilateral institutions anyway, leading to unnecessary bureaucracy, duplication and burdens on developing countries.
5. Using technology to make aid spending more transparent and accountable
We will make aid more transparent, using new technology to enable citizens to “follow the money” to see where their aid has been spent and what impact it has had. By 2019 all government departments administering UK ODA will be required to meet the good or very good standard the independent Aid Transparency Index. By 2020, the public will be able to “follow the money” for at least 90 percent of bilateral UK aid whether it is spent through NGOs, international organisations or private contractors. This will be achieved through a programme of geo-coding, traceability and standardised quantitative results. By 2020 we will move all grants and contracts to transparent reporting of expenditure and results through the open data standard of the International Aid Transparency Initiative, which implementing partners may choose to use instead of separate reporting to the government, so reducing the bureaucratic burden on implementers while increasing transparency.
6. Letting taxpayers choose
If taxpayers want to choose for themselves where their aid goes, they will be able to take the decision into their own hands using our new AidChoice initiative. Income tax payers will each be able to allocate up to £100 a year each UK ODA to UK-registered charities working in the field of international development.
Part 2 - Six ways to re-focus aid for maximum impact
To refocus our current aid to significantly increase its impact, we will draw on evidence on the effectiveness of aid spending, and change our approach in six ways:
1. Use cash transfers wherever appropriate
We will distribute at least a quarter of our bilateral aid as cash transfers, directly to the very poorest people and those affected by humanitarian emergencies. We will use technology to minimise waste and corruption so ensuring our aid goes into the hands of those that need it to be used for what they most need. We will not invest in other aid programmes exceeding £10m unless they have been assessed by NIDE and shown to be more cost-effective than direct cash transfers.
2. Lead global reform on humanitarian aid
We will work with the other donors to reform humanitarian aid to help end the duplication, lack of planning, overlap and ineffectiveness that characterizes the international response to crises, as agreed at the World Humanitarian Summit in 2016. We will bridge the humanitarian and development divide; work with countries hosting refugees to create more jobs, for example by providing access to our markets; give cash transfers rather than aid-in-kind by default; help countries to take out new concessional insurance policies that incentivise risk reduction and pay out in case of disasters like drought or hurricanes; and use innovative finance to increase refugee resettlement. We will open humanitarian aid to innovation and new technologies by working with the private sector and other new actors.
3. Resource the UK’s development finance institution, CDC, to increase investment, growth and jobs so that countries graduate from aid
We will use aid to support private investment, jobs and growth in the developing world. This is essential to provide countries with a path to graduate from aid and to meet the Global Goals. We will implement a planned programme of sustained expansion of CDC group (the UK’s development finance institution), increasing the British government’s investment to £6 billion over the next 15 years, to scale up investment and development impact of the company. Though our contributions to CDC count as ODA, they do not add to the government deficit or public spending so they will be additional to the 0.7 percent target for ODA. As part of its new strategy CDC will be increase its transparency, including full compliance with the International Aid Transparency Initiative.
4. Bilateral aid to focus on British innovation and values
Our bilateral aid will concentrate on programmes that are innovative, which draw on specialist British expertise, are neglected by others, or which help to promote our values such as human rights and the rule of law. We will increase our support to the Global Innovation Fund, research and development, think-tanks in the UK and internationally which generate knowledge and policy ideas [self serving suggestion klaxon!], and civil society groups around the world which promote rights and accountability. We will link payment to results wherever possible. This ensures that everyone is focused on what our aid achieves, rather than on spending the money, enables flexibility for risk-taking and adaptive programming, and draws in a wider range of delivery organisations.
5. Improving outcomes in fragile and conflict states
We will continue to increase the proportion of aid targeted to the most fragile and conflict-affected states, where people are most vulnerable and security threats most significant. In line with the Global Goals, Britain will ensure it leaves “no one behind” by reversing recent trends of decreased aid spending to sub-Saharan Africa, where the majority of fragile states are located. We will review the way in which we use aid in these contexts to ensure that DFID has the right policy frameworks, partnerships, human resources and finance to deliver development outcomes in these most difficult contexts, and to improve coordination between the Ministry of Defence, Foreign Office, Department of International Trade, Department of Health, Department for Business, Energy & Industrial Strategy and DFID.
6. Increasing impact investment from the private sector
We will establish a £1 billion outcomes fund for Development Impact Bonds, to enable social impact investment in key services in developing countries. We will expand the successful model of Trade Mark East Africa to support economic growth across the continent.
Many of the other policies that make Britain an outward facing, successful global, trading nation are good for Britain and good for the developing world. These include:
We will make a British Trade Promise that our post-Brexit trade policies will be better for developing countries than they are within the EU. We will use the control given to us by Brexit to strike deep and comprehensive trade deals with the EU and the US that show the benefits of free and open trade. We will take the Four Steps that would achieve lower prices for rich and poor UK consumers alike, driving up business productivity, and establish the UK as a leader on trade for development.
2. Investment and Finance
We will further develop the The City of London as a world-leading hub for enabling capital to be invested efficiently, responsibly, with integrity and in alignment with the opportunities for green economic growth globally. We will implement the Financial Stability Board’s Task Force on Climate-related Financial Disclosure and collaborating to develop financial instruments such as green bonds and catastrophe insurance.
The UK will promote leading standards in tax and transparency. We will convene the UK’s leading businesses, tax professionals, NGOs and think tanks to establish common principles for how they can work together to scrutinise and improve the UK’s impact on tax revenues in developing countries.
British courts will not uphold future contracts or agreements entered into by companies whose beneficial owners are not publicly known. Any company or organisation wishing to take advantage of the fair and efficient British legal system must be publicly transparent about the true identities of its beneficial owners.
We will support an effective UN body working on international tax systems. We will continue with our commitment to double annual aid for tax systems to £40 million annually by 2020, including seconding UK tax inspectors to work with revenue authorities in developing countries. We remain a leading member of the Extractive Industry Transparency Initiative and the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and will work with our Overseas Territories and Crown Dependencies to ensure that they offer well-regulated financial services and demonstrate the highest standards of integrity.
3. Climate and energy
Within the UK we will introduce a carbon tax, on a revenue neutral basis, recycling the revenues to households in the UK. This will increase incentives to invest in clean energy, and reduce demand for the most polluting forms of energy, production and consumption.
Climate change and energy scarcity hits developing countries the hardest. To address both issues we will increase spending on energy innovation research and development. Focusing on energy innovation policy is a global public good that is vital to create the next generation of affordable, carbon-free energy creation and storage capabilities. Investment in this research will not only benefit the world, but also our economy in particular. We will stay committed to the Mission Innovation initiative and our pledge to double energy innovation spending by 2021 to over £400m per year.
Britain will remain at the cutting edge of innovation, research and development. We will simplify our intellectual property rights to support rather than stifle innovation, tackle patent thickets and trolls, and spread British ideas through technology transfer. We will invest at least £1 billion a year of ODA in research and development for challenges that affect the world’s poorest people, including neglected diseases, clean energy and new forms of agriculture.
6. Peace and security
A major driver of conflict is the exploitation and sale of natural resources. Under international law, these resources are owned by the citizens of the country where they occur, and they may not be appropriated or sold without the consent of those citizens. The UK will in future not recognise or enforce transactions involving oil, minerals or other natural resources sold or licensed by governments that did not demonstrably have legitimate ownership of them at the time of extraction. The standard used will be based on ratings for civil liberties and political rights from Freedom House. Anyone trading in resources from such countries will be regarded as dealing in stolen property, for which the usual sanctions will apply.
Britain will no longer grant arms export licences for exports to low income countries, nor to countries that have not been designated electoral democracies by Freedom House. Instead we will invite democratically elected governments in low income countries to apply ex ante for a Security Guarantee - a time-limited insurance contract guaranteeing that British - and potentially other - armed forces will step in to defend that government from any attempt at the violent seizure of power, from either internal or external armed groups.
Once we have taken back full control of migration after Brexit, our approach will be to ensure that migration is managed, fair, and benefits the country. Migrants make a huge contribution to our public services and our economy, and we will continue to welcome people who want to come here to flee persecution, to join family members, to make a better life for themselves and their family, or to participate in our vibrant economy.
Overall migration will be paced to be below 1 migrant for every 200 British citizens per year. Migrants will be welcomed from all parts of the world, rather than just high-skilled or already-wealthy migrants. As well as being good for the British economy, migration from developing countries can provide life-changing opportunities for the people who move, increases remittances and investment in developing countries, and accelerates the spread of ideas and values which underpin development. We will introduce the equivalent of the US Green Card lottery system for developing partner countries with sound security.
We will introduce Global Skills Partnerships which will enable talented people from developing countries to be trained and accredited to fill key roles in the British economy without contributing to a brain drain from the poorest countries in the world, so benefiting Britain, the migrant, and their country of origin.
That’s the right decision and the Prime Minister deserves praise for committing to this against the wishes of many of her own backbenchers. I will explain in a moment why I think she is right. But let me say first that I understand why people have serious reservations about the spending target.
A spending target encourages us to focus too much on how much we spend and too little on what we achieve.
It could cause a rush of hastily-arranged spending at the end of the year to hit the target, wasting money on second-rate projects. (I don’t believe this happens in practice, but I can see why people fear it might.)
It appears to exempt international development from proper scrutiny. Aid, like every other use of scarce taxpayer money, should have to make its case.
Those are legitimate grounds to oppose a spending target. In many ways I would prefer that we commit ourselves to achieving particular goals in development—such as making sure every woman has access to family planning, or eliminating deaths from easily preventable and treatable diseases, or stopping deforestation—and then spend as little as we possibly can to achieve them. It is crazy to judge aid by how much we get out of the door rather than by what we achieve.
Saving lives and reducing suffering is the right thing to do. It is also a good investment for Britain. Our aid helps countries become more peaceful, better governed, more environmentally sustainable and more prosperous, and eventually helps those countries to graduate from aid altogether. It is far better to invest a small part of our income on aid than to face the much higher costs of being surrounded by poverty, disease, environmental degradation and violence.
Britain’s aid is admired globally, and with good reason. Our aid is among the most effective in the world (only Ireland and Denmark do aid better). It is a key part of Britain’s soft power and influence abroad. (Ironically, our Ministers’ desire to sweat the equity of the UK aid brand has tended to diminish our reputation for flexible, selfless and effective support—generosity buys you more friends when it isn’t accompanied by noisy self-promotion.).
Britain’s commitment to meet the international target has not just resulted in an increase in our own aid. We have led the world. Germany has recently also met the 0.7 percent target for the first time—the result, in part, of peer pressure arising from Britain’s example.
The 0.7 percent target is unquestionably arbitrary, and its origins now long obsolete (as my colleagues Todd Moss and Michael Clemens have documented.) But sometimes an arbitrary target is better than no target: we don’t call for abolition of the speed limit on the grounds that 70 mph has nothing more to commend it than 72 or 68 mph.
So I would like to see the UK spend at least as much as we do now on aid—indeed, I think we should spend more, as Scandinavian countries do. Ideally we would invest more without needing a spending target, because we can see what our aid achieves. But if we did not have a target, enshrined in law, it is very likely that aid would have been cut in recent years. That would have led directly to tens of thousands of deaths that would otherwise have been avoided, as Bill Gates rightly says. It would have slowed down the growth of aid from other donors. And it would have been a terribly myopic decision for Britain as we try to shape our role in world.
Aid represents fantastic value for money, both for the UK and for the world’s poorest people, and if we need an arbitrary spending target to protect aid from being cut, so be it. Theresa May has done the right thing by reaffirming our commitment to the 0.7 percent target. Now, as she rightly says, we have to make sure it is properly spent.
Emergencies cause poverty, drive displacement, and exacerbate insecurity. Aid to tackle natural disasters is generous, but mainly arrives when needs are acute rather than when it would do most good. Responding effectively is hard because budgets are uncertain and funding gets promised but not delivered. Please join us for the launch of a new CGD report Payouts for Perils: Using Insurance to Radically Improve Emergency Aid setting out how we can use the principles and practice of insurance to save lives, money and time when catastrophes strike.