Management of the 0.7% ODA spending target in 2020

and made two recommendations

Review

We made two recommendations after finding that 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 they needed to be.

Findings

• The government’s interpretation of the spending target made it more difficult to absorb shocks of the scale experienced in 2020.
• Cross-government coordination was strengthened and decision-making centralised.
• Aid-spending departments responded quickly and efficiently to the changed circumstances of 2020.
• However, as it turned out, the approach adopted by government at mid-year resulted in more drastic aid cuts than were needed.
• Budget reductions were rightly distributed unevenly across departments.
• The criteria used for reprioritisation were open to broad interpretation and inconsistently applied.
• Budget reductions were concentrated in countries the government identified as being most vulnerable to the impacts of COVID-19. This was partly due to their scale, as only sizeable programmes could make a significant contribution to the cuts.
• Measures were taken to improve the forecasting of aid expenditure.
• DFID/FCDO continued to use flexibility in the timing of multilateral contributions to manage the year-end target.
• Having flexible programme instruments in their portfolios also helped some bilateral portfolios reduce value for money risks.
• Volatility in forecast non-departmental ODA put downward pressure on other areas of the budget.
• Uncertainty in 2020 GNI forecasts could have been managed with less pessimism bias.

Recommendations

1. To inform decision making on ODA spend throughout the year, use a range of GNI forecasts, calculated by a range of methods and provided by a number of reliable economic commentators (including, though not limited to OBR).
2. Build options for flexing spend into country portfolios and plans, incorporating programme activities that could be scaled up or down in response to external shock, with minimal impact on value for money.