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Rethinking Aid, Freeing Trade

Overseas aid doesn’t work.  That’s the conclusion of a paper produced by the UKIP Parliamentary Resource Unit entitled Rethinking aid, freeing trade.

The paper is one in a series of discussion papers produced by the unit to contribute to policy debate and development, although it has not yet been adopted as a policy by the party.  It is written by Simon Gordon.

The summary points out that the UK government is committed to spend 0.7 percent of Gross National Income on overseas aid and claims this has resulted in a significant real-terms increase in the aid budget.  However, the budgets for other government departments have been cut, even as the demands on such departments as the NHS and social care are ballooning.  The paper says that the government’s commitment to international aid ‘should not come at the expense of its basic obligations to British citizens and taxpayers’.

Research has found that out of the £7.7 billion given in aid in 2015, just £1.3 billion – 16.5 percent – actually went on humanitarian aid, including emergency response, reconstruction relief and disaster prevention.  Almost half a billion pounds was spent on the admin costs of donors.

Much of the aid – £4.4 billion – went directly to multinational organisations in block funding and the paper points out that once this money has been delivered to these international agencies, it is no longer traceable and can be spent on just about anything the organisation wants, including its own administrative costs.  This allows for almost limitless staff salaries and expenses.  Over a billion pounds was given to the European Commission.

A good proportion of the aid was given to organisations whose job is to change political thinking, rather than helping poorer people.  One such organisation is Oxfam which, according to the paper, ‘aims to challenge Western economic policies, rather than to alleviate poverty’.  The government is in the process of giving Oxfam £64 million over five years.

Fair Trade is another beneficiary of aid.  The organisations ‘seeks to change the behaviour of consumers’ but, says the paper, this may actually harm the developing world because a good proportion of its grant goes to the more developed countries.  In addition, the paper says, ‘a substantial proportion of Fair Trade’s revenue is spent on administration costs’.

The paper quotes a 2014 report commissioned by the Department for International Development which was unable to find any evidence that Fair Trade had made a positive difference to the wages and working conditions of those employed in the production of the commodities produced and that in some cases Fair Trade producers are actually worse paid and treated than similar producers elsewhere.

Corruption is also covered by the paper, claiming that much of the aid never reaches its intended recipients because it is ‘misappropriate by corrupt governments’.  And the organisations themselves are also criticised.  In 2016, the International Development Association spent almost £2billion on administration and management – over half its total expenditure, and because of this the association could be one of those organisations that have become dependent on aid.

In his paper, Mr Gordon claims there is virtually no correlation between aid and economic growth, despite this being the aim of aid.  ‘Development aid is supposed to promote economic and institutional progress; the danger is that, in reality, it does the opposite,’ says the paper.  In his 2013 book The Great Escape, Prof Angus Deaton claims that if aid were transferred from rich countries directly to those who are living on the global poverty line, it would work.  But large aid flows do exactly the opposite of what they are intended to do.  Instead of developing their own economies, poor countries simply rely on the aid to provide what their population needs.

And another problem comes with our membership of the EU.  The bloc has a very wide range of tariffs for imported goods, many of them applying to agricultural products.  And the tariffs are more favourable for the least developed countries – good idea, you may think, but this simply encourages such countries not to develop any further as they see the prospect of having to pay higher tariffs as they develop.  Brexit will provide an opportunity to negotiate free trade agreements with poorer countries without punishing them for growing their economies.

The paper, which is no more than a consultation document at present, suggests that UKIP would reduce the overall aid budget to about £2.5 billion while negotiating deals with developing countries.  Spending on essential areas such as humanitarian issues and disease eradication would continue and health, education, water supplies and sanitation would also be considered.  Those projects that may not receive so much funding would be governments and infrastructure.

The paper proposes we should:
1    Repeal the International Development (Official Development Assistance Target) Act 2015
2    Focus resources on emergency aid and disease eradication
3    Reduce the aid budget to £2.5 billion pa
4    Abolish trade barriers against the developing world post-Brexit
5    Offer assistance to developing countries to negotiate free trade deals.

In presenting the paper, the party’s foreign aid spokesman Lisa Duffy said: “I welcome this research by the UKIP PRU. For too long, our government has prioritised ineffective aid spending over its basic obligations to British citizens. That has to change, not just so we can help those struggling in our own country, but so we can act in the best interests of developing nations too.

“As this paper shows, an increasing body of evidence suggests that more aid is not the best path to prosperity for developing countries, but that more trade is.

“Decades of development aid have failed to grow poorer economies, but post-Brexit free trade deals will. It’s time to ditch the out-dated 0.7% aid spending target; relieve global poverty with a hand up, not a hand out; make cutting trade barriers with the developing world a priority; and fill the funding gaps in our own public services.”

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2 Comments on Rethinking Aid, Freeing Trade

  1. Overseas aid is little more than bribes handed out to governments who use it for there own well being. Very little actually gets to the coal face. We should of course give assistance for natural disasters but not hard cash. I get very annoyed when money is give to charities and find out that the people who rum them are on six figure salaries. We give money to India and Pakistan both of which have a nuclear deterrent we also give aid to North Korea and Argentina who are no friends of ours

  2. All of this was foreseeable had those responsible for dishing out taxpayers’ money to all and sundry given it some thought (if they were capable of that). This needs to become UKIP policy.

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