Update to ICAI information note on UK aid engagement with China

The Independent Commission for Aid Impact (ICAI) published an information note on UK aid engagement with China on 28 April 2021. While the note was awaiting publication, the foreign secretary announced Foreign, Commonwealth and Development Office (FCDO) official development assistance (ODA) allocations for programme delivery for 2021-22. In a Written Ministerial Statement, published on 21 April 2021, he noted that “[i]n China, I have reduced FCDO’s ODA for programme delivery by 95% to £0.9 million (with additional ODA in this year only to meet the contractual exit costs of former programmes)”. He also confirmed that “[t]he remaining £900,000 will fund programmes on open societies and human rights”. As outlined in the information note (see Table 1), in 2019 FCDO expenditure accounted for just under half of the government’s total ODA spent engaging China, and FCDO’s ODA for programme delivery accounted for only part of the department’s total ODA spent engaging China.3

ICAI was not provided with advance information about these reductions and was therefore not able to report fully on these changes at the time. We were also not able to look into whether FCDO’s announcement signalled that reductions to aid engagement with China had been agreed in other departments. As a result, our published information note stated that ICAI would ask further questions of FCDO and other departments about these changes and publish an update. We asked the government to confirm:

• the budgets and, where available, expenditure across three financial years up to and including 2021- 22 for the 11 portfolios outlined in our information note
• which programmes were considered “FCDO’s ODA for programme delivery” and were affected by the foreign secretary’s announcement
• details of the contractual exit costs required for “former programmes”.

Based on the information provided, this update attempts to describe what reductions have been made by the government to UK aid engaging China. It begins with changes to FCDO’s activities and then moves on to those of other departments.

In order to fully explore the impact of the Written Ministerial Statement on FCDO’s aid spent engaging China, ICAI asked about the eight portfolios managed by FCDO outlined in our information note. These were:

1. British Council
2. Chevening Scholarships
3. Frontline diplomatic activity
4. Great Britain China Centre
5. International Programme
6. Prosperity Fund (which was moved on to FCDO’s baseline in 2021-22)
7. Former DFID China office
8. Former DFID centrally managed programmes.

In its response, FCDO confirmed that only two portfolios, the International Programme and the Prosperity Fund, are categorised by the department as “ODA for programme delivery in China” and were therefore covered by the Written Ministerial Statement. In 2020-21, the baseline year for the reductions, spending for these two portfolios totalled £17.48 million, comprising £16.7 million for the Prosperity Fund and £0.78 million for the International Programme. ICAI was told that, in 2021-22, the Prosperity Fund was to have no budget for working in China, beyond the contractual exit costs for its programmes, and the International Programme was to be provided with a budget of £0.9 million to fund programmes on open societies and human rights. This is how FCDO explains the meaning of the 95% reduction described above. FCDO did not provide us with information on the contractual exit costs for the Prosperity Fund programmes, on the grounds that these are still being negotiated.

We also requested information on planned levels of aid spending engaging China in 2021-22 from the Department for Business, Energy and Industrial Strategy (BEIS – including the Newton Fund, the Global Challenges Research Fund (GCRF) and International Climate Finance), the Department of Health and Social Care (DHSC) and the Department for Environment, Food and Rural Affairs (Defra). As a baseline, projections for 2020-21, provided to us by the government, showed a 25% decline in Newton Fund spending in China compared to 2019-20. Spending for the GCRF, DHSC and Defra had remained broadly stable.

BEIS responded that a 2021-22 budget for the Newton Fund’s work in China had not yet been finalised, and that it was unable to provide portfolio budget information for the GCRF on the basis that its partnerships “are thematically driven and challenge led and they don’t work in such a way as to budget spend on a country basis upfront”. BEIS also did not provide information on the 2021-22 budgets of individual Newton Fund and GCRF programmes that engage China.

The Written Ministerial Statement of 21 April 2021 announced a reduction of FCDO’s ODA for programme delivery in China of 95%. We have assessed the budget figures, and the reduction can be explained as referring to the closure of the Prosperity Fund programme in China. This reduction only applies to 22% of total government ODA expenditure engaging China. Of the remaining 78% of ODA spent engaging China, the government did not provide ICAI with budget figures for the 2021-22 year, and we are unable to provide a description of changes in expenditure compared to previous years. FCDO also did not provide us with details of contractual exit costs for programmes in China which are closing. Overall, it is clear that the description of a 95% reduction applies to two funding channels provided by FCDO which are considered “programme delivery… in China”, and therefore only a portion of total ODA spent by the government on engaging with China. ICAI will continue to track emerging plans for UK aid engagement in China and report on any significant new developments.