New information note – The use of UK aid to enhance mutual prosperity

23 Oct 2019

The government is increasingly spending foreign aid in areas where it can deliver benefits to both the UK economy and countries eligible for aid – but care must be taken to ensure the primary aim of poverty reduction isn’t diluted or lost, according to a new publication from the Independent Commission for Aid Impact (ICAI).

The report looks at how the UK is using its aid budget to enhance ‘mutual prosperity’ – promoting growth in the developing world while also improving UK trade and investment opportunities. As an information note rather than a review, it does not reach conclusions on whether particular interventions are relevant or effective, but instead examines the mutual prosperity agenda and highlights areas that may need further investigation.

ICAI looked at cross-cutting activities by the Department for International Development (DFID), the Foreign and Commonwealth Office (FCO), and the Department for International Trade (DIT), and found that although there is no single UK strategy or budget for mutual prosperity, the concept is becoming increasingly prominent in government policies and internal documents. While departments are currently careful to follow aid rules that make poverty reduction the primary focus, growing pressure to deliver secondary benefits to the UK means a clear set of principles on the appropriate use of aid is needed.

ICAI commissioner Tamsyn Barton said: “Our research shows that the government is increasingly putting UK economic and business benefits at the heart of its aid agenda.

“Although this can generate legitimate opportunities for both sides – for example, by harnessing the expertise and innovation of the UK’s business and financial sectors – it also creates risks, particularly in aid being shifted away from the people and countries that need it most.

“We hope that by identifying some of the key issues relating to mutual prosperity, our information note will give government and parliament a clear overview of these risks and the areas that may need further scrutiny.”

ICAI found that using aid to deliver benefits to the UK has featured in government policies since the 1960s, and the increased focus on mutual prosperity since the 2015 UK aid strategy has moved it towards the position of most other donors. The £1.2bn cross-government Prosperity Fund, established in 2016, is identified as the clearest example of UK aid being used to also deliver secondary benefits to UK business.

The report notes that focus on using aid in this way appears to have further intensified since the Brexit vote, with some government documents explicitly linking mutual prosperity to the ‘Global Britain’ agenda to reposition the UK internationally and build ties with a wider range of countries.

ICAI also recognised that some recipient countries prefer aid that promotes trading relationships, seeing it as the basis of a more equal, long-term partnership. However, the report warns that programmes with more immediate economic benefits to the UK, or in areas where the UK has particular expertise, could ultimately be favoured over those that could more effectively reduce poverty – although no examples were found of UK aid being used solely to pursue short-term commercial opportunities or to help UK businesses at the expense of competitors.

Additionally, the report highlights that DFID is increasingly being asked to contribute its time and expertise to support cross-government prosperity goals, creating a question over whether this is detracting from the department’s primary mission, and whether it is entirely compatible with being a trusted development partner.

ICAI, the UK’s aid watchdog, is responsible for ensuring UK aid is spent effectively for those who need it most while delivering value for money for taxpayers. ICAI’s research for this information note included a review of government documents and previous ICAI reports, a review of five sample Prosperity Fund business cases, interviews with government staff, and focus group discussions with civil society, businesses and academic experts.

Find out more here.