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How the new Labour government should do it
London, UK | IAN MITCHELL | The Labour party was elected with the largest majority in over 27 years at the UK’s July 04 general election. Its manifesto committed to “regain Britain’s global leadership on development” with a headline to “modernise” and a mission to “create a world free from poverty on a liveable planet”. But in their first months in office and given the lack of fiscal space what should they prioritise?
In this blog, we highlight three areas for newly appointed Development Minister Anneliese Dodds and Foreign Secretary David Lammy to focus on. In particular, we set out first how to implement their commitment to multilateralism before identifying necessary fixes to the budget, but also to capability within the government, and on policies beyond aid.
Labour has a proud record on international development and its focus on reconnecting and multilateralism arrive at a critical moment globally. Its plans to modernise international development are part of a commitment to see “Britain reconnected”. Just before the election, the then Labour development lead Lisa Nandy set out seven priorities in a letter. These are a sound basis for reform, and reflect the manifesto’s emphasis on “new approach based on genuine respect and partnership with the Global South to support our common interests”.
Championing multilateralism
Labour’s “commitment to greater multilateral action” is the most important pledge on international development in their manifesto. Multilaterals are the most effective way of tackling global issues and it’s impossible to imagine a peaceful and prosperous world without them succeeding. A key motivation for the new Government will be to ensure that it is seen as a custodian of tax-payers money. Our assessment of the Quality of Official Development Assistance across 49 agencies rates multilaterals at the top, and two replenishments in the coming year for GAVI and the World Bank’s IDA offer arguably the best ways to spend aid effectively. They also score much better than bilateral aid in terms of recipient “ownership”.
The new Government should be bold here, increasing contributions to key multilaterals, and persuading its G7+ peers that the answer to China is not the fragmented bilateral private finance approach as promoted by Liz Truss but to contribute to and champion a fully-functioning multilateral finance system. With many G7 and European governments moving to the right; this will mean making the geopolitical and economic case for a joint approach.
The government should not be afraid to signal to its partners that its official development assistance (ODA) will be spent primarily multilaterally. Although a quantified target for a multilateral share may be too restrictive they should confirm it will increase significantly from its 36 percent share of the total (last year). This will mean accepting the current historically modest level of the bilateral aid budget.
Strong contributions to replenishments, especially in aid of IDA’s $100bn goal, would provide a basis for the UK to facilitate reforms in the wider multilateral, climate and financial system. But this will depend on fixing the money.
Beyond this year’s replenishments, and as part of its new strategy, the UK should also aim to rise above the cycle of multilateral replenishments; and to work more closely with EU countries, emerging providers and the U.S., to treat multilaterals as a system (one that was built by the West but is now funded more widely). This fits with David Lammy’s call for progressive realism, serving as postwar foreign secretary Ernst Bevin did as a bridge between the U.S. and European countries.
Fixing the money
The Government will not be able to win back the trust of partner countries while it continues with the Conservatives’ approach to gaming its own commitments and targets. The new Development Minister and Foreign Secretary will need to be clear-eyed about what is and is not development spend; and persuade their Chancellor and Prime Minister that “reconnecting” must mean unwinding the previous Government’s misleading accounting, even where this has a cost.
The list of ruses is long: the tests for returning to 0.7 are barely ever met and in any case are in HM Treasury’s control; the measurement of the UK’s international climate finance (ICF) commitment has twice been changed to be less generous (the first ICF commitment was made in addition to existing aid; and it only recently began to include contributions to multilateral development banks and humanitarian spend in climate vulnerable countries); and HM Treasury required a large chunk of aid to be “Financial Transactions” (which are not “spend” and so can only be used in private finance institutions).
Worst of all, the Government cut overseas aid to fund the cost of hosting refugees inside the UK, meaning the UK is, nonsensically, the largest recipient of its own aid with over half of the bilateral budget (£5.3bn) spent in the UK.
Parliament approved the motion “to temporarily reduce the ODA budget to spend 0.5 percent of gross national income on overseas aid” (emphasis added). The new Government should set out a clear path for that to be achieved over the spending review. Last year, chancellor Jeremy Hunt provided an additional £2bn towards the £4.3bn cost of refugee-hosting; and with small-boat arrivals actually increasing Ministers should ask the new chancellor Rachel Reeves for at least a further £1bn to meet these costs.
Fixing bilateral capability…
The UK’s bilateral aid has been pushed from pillar to post with four successive rounds of cuts overseen by a newly-overtaken department. With a spending review on the horizon, and a potentially more hostile media, the new Minister will need to rebuild capability and focus effort to ensure it is delivering value for money; and be wary of long lists of thematic commitments which may not fit with developing partners’ priorities.
A guiding principle should be to focus efforts in the poorest countries where it does the most; and to improve on the Conservative’s unambitious target of only 50 percent of aid going to Least Developed Countries.
In order to deliver on any of their ambitions on greater localisation; the rights of women and girls, and meeting challenging international climate finance commitments (we’ll say more about this soon) the government will need to complete the rebuild of the department’s capability on development; and, particularly in the case of localisation,– be clear about the scale of the challenge.
….and expanding the toolkit beyond aid
A long-neglected aspect of bilateral capability relates to policy beyond aid. The manifesto commits to “deliver a new approach to the (African) continent to foster opportunities for mutual long-term benefit”; and many of the policies that matter are not financial. The law requires the FCDO to report annually on the “effects of policies. . . pursued by government departments” on sustainable development and poverty reduction – but this mechanism is barely used, creating an opportunity for the new Government to explore policy levers beyond spending.
An early priority beyond aid is the UK’s Border Carbon Adjustment Mechanism where consultation has recently closed. The EU’s scheme has faced accusations of protectionism from developing countries and ignores the principle of ‘common but differentiated responsibilities’. This was geopolitically damaging for the EU at COP last year, and the UK has the chance to do better with its approach.
Delivering change
Ministers will start important international engagements immediately with NATO first, the European Political Community next; the UN General Assembly and Summit of the Future in September; and then the IMF and World Bank Annual meetings in October followed by COP in November; and in December the IDA replenishment meeting.
Discussions at COP will be the last before new emissions plans are submitted by countries early next year; and the IDA replenishment is a key milestone in international finance reform. The manifesto sets the ambition to regain Britain’s global leadership on development: to do so it should take bold multilateral action underpinned by progress on fixing the budget issues and the UK’s wider development capability.
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Ian Mitchell is Co-Director, Europe and Senior Policy Fellow at Centre for Global Development (CGD). CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
Source: CGD Blog
