The Springfield Centre welcomes this opportunity to comment on DFID’s annual report.
Our comments focus on the following inter-related areas:
- DFID’s management of the 0.7% ODA target.
- DFID’s reform of its approach to project and programme delivery.
- How DFID works with contractors, NGOs and multilaterals, including small organisations.
- The efficacy of payment by results.
- Whether DFID’s current staffing levels are adequate and deployed effectively.
A: The 0.7% ODA target (adversely) influences everything DFID does
- UK aid budgets are increasing. At 0.56% of Gross National Income (GNI), the UK spent around GBP8.5bn in 2012. In 2013 it spent £11.3bn. To meet its target of 0.70% of GNI spending will reach GBP12.4bn in 2015, as a result of stronger economic growth, according to the Office for Budget Responsibility. That is a more than three-fold increase in real terms over the ODA level in 2000. At a time when most other areas of public expenditure are being cut, it is an extraordinary increase.
- The 0.7% target has no credible intellectual underpinning to suggest that it is the correct amount of aid to make a decisive lasting difference to poverty. It is an arbitrary figure emerging from a political judgement arrived at in 1970. Indeed, Michael Clemens and Todd Moss, in their comprehensive demolition of the validity of the 0.7% aid target, calculate that applying the same method used to arrive at the 0.7% figure to current conditions would yield an aid goal of only 0.01% of rich country income. The fact that UK ODA spending will increase by £1bn from 2014 to 2015 is not based on any analysis of developing country needs, but is an accident of higher rates of economy growth in the UK.
- Why does this matter? Because the sheer scale of the UK aid budget looms large over aid debates and policies, and its effect on the functionality of aid is damaging and significant. It has resulted in increased politicisation, a distorted culture and dysfunctional approaches and processes for programming aid. In essence, DFID is not managing the consequences of the UK’s increasing aid budgets.
Increased budgets have politicised UK aid to an unhealthy degree
- This extraordinary increase in aid budget is happening in the much-publicised context of sweeping budget cuts in almost all other areas of government. As the cuts bite into the economic and social fabric of the UK, defending the need for international aid has become a sensitive domestic political issue. Aid has become high profile. In response, the government is increasing its control of the programming UK aid. The UK Secretary of State for International Development, now makes direct spending decisions for all supplier contracts above £1m, and for all business cases above £5m (far lower than the previous £40m threshold).
- Is this because her civil servants in DFID lack the technical ability to make and take programming decisions? Surely DFID is quite capable of making technical decisions on aid programming? No, the reason the Secretary of State is making these decisions is entirely political. It is about political oversight, control and communication, driven by the increasing politicisation of aid as a result of higher aid budgets. The framework for taking decisions about all UK aid programming is no longer a technical one; it is a political one. This assertion is echoed in a paper by David Booth: ‘Unfortunately… the development business is not [now] led by mid-range technical specialists. It is politically led, directly (bilateral) or indirectly (multilaterals), resulting in systemic incentives which override attitudes, and the acquisition of skills.’
Increased budgets have distorted the culture of UK aid
- The focus on the amount the UK spends on aid has perpetuated the myth that ‘more is better’; there is a tacit opinion that a higher UK aid budget is inherently a good thing. This is based on two flawed premises. The first premise is that development is essentially charity, a good cause, where the kindest people, organisations and countries give the most to the needy. How this largesse is used, whether it makes a significant and lasting difference or only serves as a short-term palliative, matters less. The point is to give. And the more the better. The danger, as with all charitable endeavours, is that ‘vanity of the giver’, the superficial feeling of ‘doing good’, takes precedence over concerns about the substance of achievement.
- The second premise is that development is a ‘deliverable’ by rich country governments. As DFID’s budget has risen so the tendency has grown to justify aid in the same way as other areas of public expenditure, such as education, health, and pensions, as public goods that the UK government delivers. Again, the more that government spends the more that it can claim to be meeting its responsibilities. Seeing aid as another state responsibility to be delivered invites it to be managed and perceived in the same way. Hence, DFID:
- Has introduced the business case process, used throughout government spending departments, to examine aid programmes.
- Emphasises direct deliverable targets in its operational plans – children supported in schools, vaccinations delivered, malaria nets distributed, jobs created, etc – in the same way as other departments in the UK.
- Highlights value for money as a central mantra in all its work, and with it stresses the efficiency of delivery.
- Now makes a proportion of contractor payments conditional on direct deliverables.
- The problem with these efforts to normalise DFID spending, to make it directly comparable to other areas of domestic expenditure, is that it misunderstands and distorts the fundamental essence of what development is. Aid is not ‘normal’. The UK government cannot deliver the development of other, sovereign countries in the same way that it can, for example, a better education system in the UK. Indeed, the more it tries to play a delivery role the more it may undermine the essential goal of development, to allow countries and people to develop themselves.
B: DFID’s approach to project and programme delivery is becoming dysfunctional
- The politicising and culture-distorting effects of increasing aid budgets have had in turn adversely affected DFID’s approach to project and programme delivery, in terms of timing, attitudes to risk, a focus on ‘ends’ rather than ‘means’, and the desire for visibility.
Timeframes for achieving impact are becoming unrealistically short
- The timeframe in which aid-funded interventions are supposed to achieve impact is increasingly skewed towards the short term. Defending aid budgets in the face of (perceived) media scrutiny results in a political demand for more visible results (or photo opportunities), achieved more quickly and more frequently. This is a domestic agenda, driven by 24-hour news cycles, a fear of the Daily Mail or Radio 4’s Today programme; it is not shaped by realities on the ground.
Risk aversity is increasing
- There appears to be a growing assumption that the relationship between inputs and outputs are linear and predictable, that funding levels are directly proportional to results achieved. Again, more is better. This is not credible in a developing country context. If development means strengthening national systems (comprising national governments, the private sector and civil society stakeholders), then it must be accepted that the starting point is weak, risks are high, absorptive capacity low, and that progress towards lasting impact will not be smooth.
Focusing on ‘ends’ and neglecting ‘means’
- All aid-funded interventions should be concerned with achieving tangible impact on the lives of poor men, women and children, but not to the detriment of the means by which these impacts are achieved and maintained in the long run. The prevailing approach in DFID centres almost exclusively on delivering the ‘what’ (do people need) and ignores the ‘how’ (do poor people get what they need, now and in the future, sustainably and at scale). Sustainable development is not about delivering insecticide-treated malaria nets directly; it is about developing sustainable systems of net provision. It is not about paying for children to attend school; it is about developing more inclusive, higher quality school systems. It is not about subsidising loans; it is about developing better functioning financial markets. It is not about handing out seeds; it’s about developing sustainable, high outreach agriculture input supply networks. Delivering solutions directly might result in a short term splash of impact and glowing headlines in the Guardian, but all too commonly direct delivery displaces the emergence of the local capacity, investment and ownership that is needed to continue delivering solutions into the future.
Desire for visibility
- Increased politicisation and short-termism appears to have increased the desire for UK aid to be as visible as possible, as means of direct validation from the people aid is supposed to be supporting, akin to USAID’s ‘a gift from the American People’ branding. DFID now issues detailed instructions about when and how to put the Union Jack on anything touched by UK aid; DFID officials obsess over the ‘optics’ of new initiatives (i.e. what they look like). Inevitably, as it has become more political and prominent, DFID has become more concerned with the superficial and saleable, with what aid looks like to the government’s key audiences.
- The approach to project and programme delivery being promoted, by decision if not by design, is one which is undermining the very essence of development. It is shifting away from catalysing and empowering local stakeholders, and back towards direct delivery and dependency, a place where the development field has been before. Similar concerns have been raised by the Director of the Development and Cooperation Directorate of the OECD in his 2012 UK Mid-Term Review:
‘… Risk that DFID’s strong focus on results and value for money distorts the way it wants to work, as it may lead to favour numbered outputs and short term achievements, to the detriment of qualitative results and longer term, sustainable impact.’
‘The results framework also needs to retain enough flexibility to avoid undermining DFID’s key objectives and assets (increased focus on fragile states; flexible, context-based approach to aid programming).’
‘While promoting accountability to the UK taxpayers, DFID does not want to bypass national systems.’
C: Are DFID’s systems fit for purpose?
- Larger budgets, based on an arbitrary GNI target, have been accompanied by a value-for-money agenda, driven by a concern that increased funding for aid is not wasted. The domestic agenda is at play again: more aid demonstrates compassion to the Guardian constituency; the value-for-money mantra exhibits business-like toughness to the Daily Mail
- This value-for-money agenda has often been translated into cost-cutting measures, within DFID and within its programmes, reducing oversight and implementation capacity just as spending has escalated. This has created an almost unbearable pressure within DFID to spend money. Programmes are scrutinised and penalised for underspending tax payers’ money, if their ‘burn rates’ aren’t sufficiently high or predictable.
- This has made DFID and the contractors who work for it seek ever more creative, tortuous ways of spending money. New ways of handing out grants are invented. Governments are loaded up to the limits of their absorptive capacity. Private firms of any size and importance are offered support. Cash is given directly to households, like some extension of the UK welfare state. Some smaller countries – such as Malawi and Nepal – are saturated, with development initiatives from DFID and other donors. The imperative to spend larger budgets creates a range of grotesque distortions: costs escalate, salaries inflate, the best people are attracted (at the expense of the real economy), government officials demand cash for any interaction with projects – a parallel, artificial aid world develops.
Relationships with contractors and payment by results are not encouraging quality, innovation or sustainability
- The transformational ambitions of development flounder amidst DFID’s organisational realities. Contractors, taking their cue from DFID, know that success in spending money is likely to be rewarded with budget increases. At the same time, value-for-money scrutiny has seen the level of bureaucracy grow, with two consequences: (a) demands for tight delivery-oriented accountability steer projects to pursue change that is most easily measured, rather than change that is most important; and (b) although more resources are available, spending, paradoxically, becomes more difficult, with decision-making processes paralysed by value-for-money fears.
- Payment by results, rather than encouraging contractors to work with and facilitate national systems to evolve and improve, is promoting a focus on delivering directly, bypassing national systems. If contractor payments are now at risk, why should contractors take any risk beyond that which they can control fully and directly?
- DFID’s concern with efficient procurement has re-shaped the way development industry works, with a detrimental impact on quality and innovation. Framework agreements have concentrated power within a few large contractors whose incentives to deliver quality and innovation are greatly reduced by both the volume of work they are almost guaranteed to receive, with little transfer of contractor performance data from programme to programme, or country to country. DFID has historically benefited from the technical expertise of smaller, specialist organisations which are able to be more agile and innovative. However, now these organisations are beholden to large contractors, their ability to shape the work they do is limited and they become task-based consultants with less control of technical delivery. They are obliged to comply with the demands of larger contractors, having been unable to meet compliance requirements to be eligible for the framework agreements. Further, small organisations do not have the vast resources available to invest in the tendering process that larger contractors do, and so are not likely to be able to compete. Consequently, the terms of trade in negotiating with large contractors are skewed away from smaller organisations. For example, DFID’s fast-track payment terms for small businesses are seldom reflected in the contractual terms or payment practices of large framework contractors who sub-contract small organisations.
Inappropriate staff incentives, capacity and processes for reporting and learning
- The consequences of vastly increased budgets, and the perverse politics and culture associated with it, are perhaps most striking when it comes to incentives, capacity and processes within DFID. The Economic Affairs Committee of the House of Lords and ICAI have highlighted these issues in the past, but they bear repeating, because the situation shows no signs of improving.
- Staff incentives are typically not aligned with good development but with meeting spending targets, and with the ability to deliver politically-appealing symbols of progress. For a DFID civil servant, say a technical adviser, typically posted for three years in a country, career incentives encourage the commissioning of new projects and programmes. The emphasis is on new programming and projected spending, not quality of implementation. Initiatives tend to be judged by their consistency with formal and informal compliance signals from DFID management, rather than their likely efficacy in terms of developmental impact. By the time the performance of an initiative is scrutinised – they typically take eighteen months or so to set up – the advisor will be on the way to a different posting, so there is little accountability for performance. These incentives have to be seen in a context of DFID – with a rising budget and higher profile – as a more political entity than in the past. Decision making takes place in a political space in which what matters is looking good and sounding credible. The technicalities of ‘how to’ have been inexorably squeezed out. There is a fundamental misalignment between personal and organisational incentives and genuine development goals.
- When DFID and its predecessor (ODA) had a smaller budget it had a reputation for competent technical know-how. Consensus states that this technical competence is decreasing, with know-how on contractor and budget management and internal procedures emphasised instead. In an era when high budgets are DFID’s distinguishing feature and its biggest problem the capacity to deliver projects that spend large amounts is highly prized.
- The on-going overhaul of DFID processes – epitomised by the tortuous business case format – has resulted in new levels of bureaucracy and an emphasis on delivering and reporting on easily-measured direct deliverables, rather than on underlying changes in the real world affecting poor people. More broadly, the larger DFID’s budget and profile has grown – and the more energetic its efforts to demonstrate its toughness with suppliers – the more invasive and crippling the bureaucratic burden has become.
- With little incentive to go beyond the superficial, DFID’s own analysis seldom reaches the underlying reasons why intervention fails. As ICAI () has reported, there is scant evidence of deeper thought or learning about underlying efficacy when targets have to be met (with staff bonuses dependent on these) and the wider rules governing behaviour – ‘spend big, act tough, look good’ – apply. In conclusion, the sheer size of DFID’s budget has pushed the UK’s development effort into a political space which has twisted its incentives and functioning. This new political economy of aid makes effective development increasingly difficult, and often impossible. The contradiction between the high aspirations of development and its absurd, unworkable processes have never been more obvious.
- In a speech to Parliament on 13 June 2013 Rory Stewart MP reflected on his learning from the UK’s post-war development efforts in Iraq. He remarked on the basic dysfunctionality he witnessed: ‘the entire structure of our organisations, their incentives, their promotions, recruitment, the way they interact with policy-makers… do not help us to acknowledge failure’ and that ‘we do not acknowledge failure’ because, ‘at some level, we’re not serious’.
- Unless we are prepared to fundamentally reappraise the overarching targets and culture of UK aid, its prevailing incentives, capacity and processes, and to increase the level of scrutiny applied to it, any efforts to reform aid are not serious and are destined to fail.
 MA Clemens and TJ Moss (2005); Ghost of 0.7%: origins and relevance of the international aid target; Center for Global Development; Working Paper No. 8, Washington.
 D Booth (2011); Aid Effectiveness: bringing country ownership (and politics) back in; ODI; Working Paper 336; London.
 Economic Affairs Committee, 2012, Economic Impact and Effectiveness of Development Aid, Sixth Report, 20 March 2012.
 Independent Commission for Aid Impact, 2014, DFID’s Private Sector Development Work, Report 35, May 2014