New ICAI rapid review: Management of the 0.7% ODA spending target in 2020
- Rapid review from Independent Commission for Aid Impact examines how government managed the 0.7% aid spending target in 2020 in light of COVID-19 pandemic.
- Aid watchdog finds that although government met its spending target, cuts to bilateral aid programmes were more drastic than they needed to be, due to its rapid ‘cut once, cut deep’ approach and reliance on single and particularly low GNI forecast.
- Report makes two recommendations designed to improve flexibility in the face of further economic shocks.
The government successfully met its aid spending target in 2020 through reprioritising programmes as the COVID-19 pandemic hit – but economic uncertainty and the government’s ‘cut once, cut deep’ approach meant that cuts to bilateral aid were ultimately more drastic than needed to be, a new report by the UK’s aid watchdog has found.
The rapid review, published today (Thursday 20th May) by the Independent Commission for Aid Impact (ICAI), assesses how well the government managed the 0.7% aid spending target during 2020, in light of the unprecedented challenges caused by the COVID-19 pandemic.
The review – which is not scored and does not comment on the government’s decision to reduce the spending target to 0.5% in 2021 – builds on an earlier review of the government’s management of the aid target between 2013 and 2019, which found that the government’s approach had become increasingly effective and well-coordinated across government, but making the management process more flexible could reduce the impact of volatility in national income.
ICAI’s chief commissioner, Dr Tamsyn Barton, said “The COVID-19 pandemic caused significant disruption to the UK economy and made it challenging for the government to meet its spending commitment while also providing additional aid to help developing countries respond to the devastating consequences of the virus.
“However, by basing its approach on a particularly low forecast that was soon after revised upwards, the government reduced bilateral budgets more than was ultimately necessary. More flexibility – in line with the recommendation we made in our earlier review – could have enabled the cuts to be considered and rolled out over a longer period of time. With the ongoing pressures on public finances and the aid budget, value for money is more important than ever.”
The COVID-19 pandemic led to major changes in the UK aid programme for 2020. By the end of the year, the government had spent £1.39 billion to meet the urgent health and humanitarian challenges facing developing countries. At the same time, a sharp fall in projected gross national income (GNI) resulted in the government planning for a £2.94 billion in-year reduction in aid spend, to meet but not exceed the 0.7% GNI spending target – leading to aid programmes being cancelled or postponed.
ICAI acknowledged that in these circumstances, meeting the 0.7% target in 2020, which the government achieved through a combination of delaying some payments to multilateral institutions, which are typically better placed to handle disruption to their operations, cutting expenditure on some programmes and deferring others to 2021, was a “considerable achievement”.
However, ICAI also reported that the planned package of cuts to bilateral aid – aid provided directly to specific countries, regions or programmes rather than being distributed through multilateral institutions – announced in July was based on a single and particularly low GNI forecast, and was not revisited even when more positive predictions became available before the final package was signed off. This approach, which ICAI described as ‘cut once, cut deep’, was designed to reduce the risk that additional cuts would be needed later in the year, when time and options would have been more limited – but in practice it meant that the cuts proved to be more drastic than needed. ICAI said that this had created significant value for money risks, which were exacerbated by the speed at which decisions were taken. It concluded that bilateral aid could have been protected if the government had instead been more flexible in its approach.
ICAI also pointed out that no serious consideration had been given to other ways of managing the target, such as moving to a three-year average so that the cuts could have been planned over a longer period of time. It added that, although the government had tried to prioritise support to countries that were highly vulnerable to the impact of COVID-19, overall the budget reductions fell largely on those countries. In addition, the further reductions required as a result of the subsequent decision to reduce the spending target to 0.5%, meant that spending that had been deferred in 2020 was now at risk of being cut.
Although established cross-departmental governance processes had proved resilient, with strategic scrutiny across government having been strengthened to some extent, ICAI warned that moving decision-making about portfolio and programme adjustments away from those closest to the detail, heightened value for money risks.
ICAI made two recommendations – firstly, that a range of GNI forecasts by a number of reliable economic sources should be used to inform decision making on aid spend throughout the year, and secondly that options for flexible spend, which can be scaled up or down in response to external shocks, should be built into country portfolios and plans.