Where next for DFID? A public debate is needed on the forthcoming Public Service Agreement and budget settlement.

In the heart of Whitehall, negotiations are currently underway on two matters that will shape the Government’s actions on international development until 2011. Surprisingly, there is little public debate about either.  Yet there should be.  Aid volumes are increasing sharply.  At the same time, the development agenda is changing very fast, in some ways extending or moving beyond the poverty reduction paradigm that has dominated for the past decade.  This challenges the Government as a whole to be clear about its objectives, and particularly challenges DFID.  Will the Department fulfil its mandate as the lead agency across government on all aspects of international development?  Or will it find itself concentrating its efforts on spending the additional aid volume, in some ways reverting to the mission of the old ODA?

The two key processes are related to the Comprehensive Spending Review, which will be issued in July 2007 and set public expenditure levels from 2008-09 to 2010-11.  The first is the Public Service Agreement, which will set objectives and performance targets.  The second is the budgetary provision which will be available to meet these.

The Public Service Agreement, or PSA, is a kind of contract between the Treasury and individual Departments.  The model was introduced in 1998, to coincide with Gordon Brown’s first public expenditure review as Chancellor.  The first PSAs covered the period 1999-2000 to 2001-02.  A second set was announced in 2000, to cover the period 2001-02 to 2003-04.  A third set was issued in 2002, to cover the period 2003-04 to 2005-06.  And a fourth set was issued in 2004, to cover the period to 2007-08.  The new set will cover the period 2008-09 to 2010-11.  For a history of Spending Reviews and links to past reviews, see here.  For the history and an analysis of the content of PSAs, see here.

In the forthcoming review, there will be one major departure, in that the 2008-09 to 2010-11 PSAs will be whole of Government  commitments, rather than Departmental targets, with individual Departments leading on all or part of each PSA.

As far as DFID is concerned, the last and current PSAs can be found here, along with reference to a separate conflict prevention target that is shared with the FCO and the MoD.  Previous DFID PSAs can be found on the Treasury website, for 1998, 2000, and 2002.  For ease of reference, Table 1 below summarises the objectives of the successive PSAs (with interpolation fro the first, which had a different structure to later versions).

Under each objective, there are many specific targets.  For example, with respect to health:

• the 2001-04 PSA set a target of reducing from 132 per thousand to 103 per thousand the average under-5 mortality rate in the top ten recipients of DFID health care assistance;
• the 2003-06 PSA set a target for reducing Under-5 mortality in Africa from 158 to 139 per thousand for both boys and girls, and in Asia from 92 to 68;
• the 2005-08 PSA set a target of reducing the Under-5 mortality rate by 8 points in Africa and 24 in Asia.

Comparing the PSAs over time, it is notable that the strategic focus has consistently been eliminating poverty, especially by achieving the MDGs.  This is in compliance with the 2002 International Development Act, which enshrined poverty reduction as the only legitimate purpose of UK development assistance.  It provided that

‘The Secretary of State may provide any person or body with development assistance if he is satisfied that the provision of the assistance is likely to contribute to a reduction in poverty.

In this Act "development assistance" means assistance provided for the purpose of-
(a) furthering sustainable development in one or more countries outside the United Kingdom, or
(b) improving the welfare of the population of one or more such countries.

 . . . "sustainable development" includes any development that is, in the opinion of the Secretary of State, prudent having regard to the likelihood of its generating lasting benefits for the population of the country or countries in relation to which it is provided.’

At lower levels, there have, however, been shifts of emphasis.  For example, new objectives appeared, to focus DFID’s mind on influencing the international system to perform better, and also to emphasise DFID’s role in promoting policy development and innovation.

Note that some objectives and targets are shared with other Departments – for example trade targets are shared with DTI, conflict reduction targets with the Foreign Office and the Ministry of Defence.

It is possible to have a certain amount of fun with the PSA targets.  For example, how did the authors imagine that UK Government aid could achieve, i.e. be held accountable for, ‘a sustainable reduction in the proportion of people living in poverty in East Asia and the Pacific from 15% to 10%’ (2003- 6 PSA), when DFID assistance to the region in aggregate terms was always going to be insignificant?

More important, the PSA to 2010-11 is being prepared at a time when the development agenda is changing very fast and when substantial amounts of new money are likely to be available.  What should the (Government-wide) PSA look like?  And what should be DFID’s role?

On the first question, I have not been the only person to argue that the development agenda is changing, reflecting changes in the global economy as well as concerns with security and issues like climate change (see here).  The new issues are most evident in what I have termed the 0.2% Club rather than the aid-dependent 20% Club, but they are universal.  The agenda needs to include:

1. Security in its widest dimension. On this, see the recent contribution by the EU External Affairs Commissioner, Benita Ferrero-Waldner, in which she talked about ‘human security’ as a model, and argued that ‘some in the development and foreign policy worlds still believe there is a hard and fast distinction to be made between development and foreign policy, or foreign and domestic policy. The truth is these distinctions are losing their meaning’. See my blog on this, and relevant references, esp to EU policy, here.
2. Climate Change, of course, where the best current brief is probably the Stern Report.
3. Other global public goods, where the agenda has been set by the International Task Force on Global Public Goods, whose recent report can be accessed here. In addition to climate change, the Task Force paid particular attention to infectious disease, financial stability, the international trading system, peace and security, and knowledge generation.
4. Managing a new globalisation, in which growth in China, particularly, is driving primary commodity prices up and manufactured prices down. See, for example, the work of Raphie Kaplinsky.
5. The challenge of a new global governance, and in particular moving beyond what Dirk Messner and John Humphrey have called a turbulent multilateralism.

We know that developing countries wish to engage with OECD partners on these kinds of questions.  An example is that when Tony Blair went to China as President of the EU in September 2005, the agenda was very largely ‘developmental’ but hardly at all to do with aid.  In work Mark Robinson and I carried out for the Asia 2015 conference, we identified the key areas of dialogue as needing to include aid, but also: a new regionalism in and with Asia; strengthening multilateralism; facilitating business partnerships; and civil society partnerships.  Our paper can be read here.

In thinking about all this, I have been led to argue that the development challenge now lies at the interface of work traditionally carried out by ministries of foreign affairs, finance, trade, defence – and aid.  So what kind of development-related PSA would be appropriate?

One option is to take up an idea we are developing for a possible European Union Development Report.  This recognises the special importance of poverty reduction and the value of the MDGs.  However, poverty reduction is embedded in the wider framework of a globally inclusive world in which:

• Peace, democracy and the rule of law are the norm;
• Human rights are respected;
• Individuals are able to maximise their capabilities and potential (based on the MDG agenda);
• Excessive inequalities are addressed (nationally and globally);
• Global climate change is tackled effectively and the environment is protected;
• Global Governance is based on principles like effectiveness, transparency, accountability and fairness

If these were the aims of British policy, then it would be possible to set objectives in each indicator, with specific targets.  Of course, the targets would have to be manageable and not outside the reach of UK government policy.  A logical framework approach would help distinguish overall objectives from the specific outputs of UK government intervention.

A Government-wide PSA along these lines would obviously need contributions from different departments and ministries, but that is acceptable, provided that there is a mechanism for coordination at central level.

The question then is where DFID’s responsibilities start and end.  An obvious but highly limited option is to focus on aid delivery, but that surely takes DFID back to the days of ODA and would mean discarding some of the expertise it has accumulated since 1997, for example on conflict management or trade policy.

At the other extreme, DFID could become the lead department on all aspects of international policy as they affect developing countries, which is attractive, but that would mean taking on responsibility for issues like nuclear weapons in North Korea or Iran (to the extent that Iran is a developing country), which is probably beyond the competence even of DFID.

There is a large area between these two extremes, however.  It needs to be explored and has big implications for the staffing of the Department.  There may also implications for the International Development Act, which has been helpful in preventing commercial contamination of the aid budget, but may prove to be restrictive if the development agenda expands.  Much here depends on how the words ‘poverty reduction’ and ‘sustainable development’ are interpreted.  There is no reason to dilute the poverty reduction paradigm, far from it, but challenge will be less likely if ‘poverty reduction’ and ‘sustainable development’ can be interpreted with appropriate flexibility.

A related issue has to do with the budget outcome of the Comprehensive Spending Review.  This will be watched carefully, to see whether the Government is meetings its various pledges, specifically

• To reach 0.56% of GNP by 2010 (the EU commitment); and
• To reach 0.7% of GNP by 2013.

In this connection, a key issue is the rapid increase in cash commitments that will be needed to reach the target once debt relief begins to decline.  Statistically speaking, debt counts as official development assistance for the purpose of reporting to the Development Assistance Committee of the OECD, and thus contributes to the 0.7% target, but is not part of the DFID cash budget.  Debt relief has accounted for about one third of total oda in recent years, but will decline and will need to be replaced with real cash.  Will the path to the 2010 and 2013 targets be gradual, front-loaded, or (arguably the worst case) back-loaded in the later years?

Finally, it will be necessary to monitor specific spending commitments within the aid budget, for example to spend £8.5bn on education by 2015 or double assistance to water and sanitation in Africa, or spend £100m on Aid for Trade.  The 2006 White Paper lists many such.

All in all, there seems to be plenty to discuss.  Is it not surprising that we are not, on the whole, having the discussion?

Simon Maxwell
5 December 2006