- The United Kingdom (UK) is the 3rd-largest donor country, spending US$18 billion on net official development assistance (ODA) in 2016 (in current prices).
- In 2013, the UK became the first G7 country to achieve the United Nations (UN) target of spending 0.7% of its gross national income (GNI) on ODA. It has met this target ever since. Prime Minister Theresa May and the Department for International Development’s (DFID) Secretary of State, Penny Mordaunt, have reaffirmed this commitment.
- DFID is the main provider of UK ODA, managing about 80% of total spending in 2015, down from 86% in 2014. The government plans to allocate an increasing share of ODA through other ministerial departments and cross-government funds. This includes, among others, the Conflict Stability and Security Fund, the ODA ‘crisis reserve’, and the Prosperity Fund, which aims to promote economic growth and private sector opportunities.
- The UK’s ‘Aid Strategy’, published in late 2015, outlines four key priorities: 1) strengthening global security, 2) resilience and response to crisis, 3) promoting global prosperity, and 4) tackling extreme poverty. DFID aims to allocate half of its budget to fragile states and regions. It also plans to use ODA more strongly to advance the UK’s foreign trade interests.
- The Multilateral Development Review (MDR) and Bilateral Development Review (BDR), both published in November 2016, play key roles in shaping the UK’s bilateral and multilateral approaches to allocating development funding. The MDR introduces new performance agreements with multilateral organizations, restricting a share of UK funding until these organizations meet pre-agreed performance targets. The BDR highlights priority areas for the UK’s bilateral cooperation, including security, migration, climate, and health, and work in fragile and conflict regions.
- DFID released its Civil Society Partnership Review in November 2016, which outlines four new mechanisms for funding civil society organizations (CSOs). The review proposes a move away from unrestricted core funding to a more competitive and results-focused funding model, with an expanded network of CSOs.
- In January 2017, DFID published its first Economic Development Strategy. The strategy outlines five priority sectors for DFID’s work on promoting economic development: 1) infrastructure, energy and urban development, 2) agriculture, 3) exports, manufacturing, and services, 4) extractive industries, and 5) economic inclusion. This may provide opportunities to leverage more development resources for these priorities.
the big six
- How much ODA does the UK provide?
The UK is the 3rd-largest donor country; 0.7% enshrined into law since 2015
The United Kingdom (UK) is the third-largest donor country, after the United States and Germany. According to Organisation for Economic Co-operation and Development (OECD) data, net ODA stood at US$18.0 billion in 2016 (in current prices; US$20.1 billion in 2015 prices). In 2013, the UK became the first G7 country to achieve the United Nations target of spending 0.7% of its gross national income (GNI) on ODA, and it has maintained this level since then. In 2015, the UK Parliament passed a bill enshrining this target into law. The Prime Minister, Theresa May, and the Department for International Development’s (DFID) Secretary of State, Penny Mordaunt, have reaffirmed the UK’s 0.7% commitment. Former DFID Secretary Priti Patel emphasized plans to ensure that DFID’s ODA ‘drives taxpayer value’, and it remains to be seen to what extent Mordaunt – appointed in November 2017 – will emphasize this strategy going forward’.
DFID is the main provider of the UK’s development assistance; according to UK government data, DFID managed 80% of the country’s ODA in 2015. However, the government plans to allocate increased shares of ODA through other ministerial departments and through cross-government funds (for more details, see question four: ‘How is the UK ODA budget structured?’). According to DFID estimates, the proportion of ODA to be spent by other departments is set to rise to 26% by fiscal year (FY) 2019/20.
- What are the UK‘s strategic priorities for development?
Increasing focus on fragile states and regions
The ‘UK Aid Strategy’, released in November 2015, highlights four strategic objectives for the UK’s development assistance: 1) strengthening global security, 2) strengthening resilience and response to crisis, 3) promoting global prosperity, and 4) tackling extreme poverty (see more details in box). The UK places a particular focus on fragile states and regions. The Department for International Development (DFID) plans to spend at least half of its budget on fragile states and regions going forward.
Global health is another focus of UK development policy. According to OECD data, the UK spent around US$3.0 billion on global health in 2015, making it the second-largest donor to this area after the United States. The amount corresponds to 16% of the UK’s total ODA, which is much higher than the average ODA share spent on global health (9%) by members of the OECD’s Development Assistance Committee (DAC). The UK is also a strong supporter of multilateral global-health initiatives, and is one of the largest funders of the Global Fund to Fight AIDS, Tuberculosis and Malaria and of Gavi, the Vaccine Alliance.
Based on figures published by the OECD DAC, the sector to receive the largest share of UK bilateral ODA in 2015 was humanitarian assistance (16%). This reflects the UK’s focus on strengthening responses to crises in fragile states and regions. Global health was the second-ranked sector, at 13% of bilateral ODA in 2015, followed by government and civil society (9%), and education (8%; see figure).
The UK’s four strategic priorities for development:
- Strengthening global peace, security, and governance: At least 50% of DFID’s annual budget will be spent in fragile states and regions; Conflict Stability and Security Fund set up to strengthen global security (£1.0 billion in FY2015-16; to increase to £1.3 billion by FY2019-20).
- Strengthening resilience and response to crisis: £500 million ODA ‘crisis reserve’ established to enable rapid response to emergencies.
- Promoting global prosperity: £1.3 billion Prosperity Fund set up to promote economic reforms and improve business climate in developing countries; DFID’s recent Economic Development Strategy highlights a stronger role for the CDC group, the UK’s development finance institution that specializes in private sector finance.
- Tackling extreme poverty and helping the world’s most vulnerable: Focus on eliminating extreme poverty by 2030, supporting the world’s poorest people, and improving access to basic needs; particular focus on rights of girls and women.
Three review documents play a key role in shaping the UK’s bilateral and multilateral approaches to development funding. First, the Bilateral Development Review (BDR), published in November 2016, assessed the composition of DFID’s bilateral portfolio, geographic priorities, and delivery channels. The BDR highlights several priority areas, including global health, security, climate, disabilities, and migration. Second, the Multilateral Development Review (MDR), published jointly with the BDR, assessed the effectiveness of multilateral organizations and their approach to ‘value for money’. The MDR introduces performance agreements, which restrict the disbursement of funds if agencies do not meet pre-agreed performance targets. In particular, DFID plans to link 30% of its multilateral funding to UN development and humanitarian organizations ‘to improved results’. The MDR also points to the need for multilateral organizations to better coordinate their work to reduce duplication and competition, and calls for more openness about their management and budgets to improve transparency and accountability.
The Civil Society Partnership Review, the third review, released in November 2016, assessed the role, funding options, and effectiveness of UK and international civil society organizations (CSOs). The review outlines four new mechanisms for CSO funding, and a move away from unrestricted core funding to a more competitive and results-focused funding model, with an expanded network of CSO partners (for more information on the four mechanisms, see ‘How is ODA spent?’).
In January 2017, DFID released another strategy, the Economic Development Strategy that will drive the way DFID allocates funding for the promotion of economic development. The strategy outlines five priority sectors for DFID’s work in this area: 1) infrastructure, energy, and urban development, 2) agriculture, 3) exports, manufacturing, and services, 4) extractive industries, and 5) economic inclusion. The strategy also outlines a stronger role for the CDC Group, the UK’s development finance institution, within the UK’s development programs. The government is planning to increase its support to the CDC Group over the coming years. In November 2016, a draft bill by Parliament was issued stating that the funding limit for the CDC Group could see a fourfold increase, from £1.5 billion to £6 billion.
- Who are the main actors in the UK’s development cooperation?
DFID leads on strategy setting and funding decisions for the UK’s development policy
The UK is currently governed by the Conservative Party, headed by Prime Minister Theresa May. The Department for International Development (DFID) leads on strategy setting and funding decisions for the UK’s development policy. DFID is headed by the Secretary of State for International Development, Penny Mordaunt. DFID’s Executive Management Committee, chaired by the Permanent Secretary for International Development, Nick Dyer since August 2017, oversees implementation and is accountable for ensuring that DFID departments deliver results consistent with ministerial priorities. DFID has over 2,700 employees and implements programs in 28 priority countries, and through various regional programs (for more details, see question six: ‘How is ODA spent?’).
THE UK'S DEVELOPMENT COOPERATION SYSTEM
Parliament: The UK Parliament is composed of the House of Commons and the House of Lords. Within the House of Commons, ‘select committees’ review the work of ministerial departments. The International Development Committee scrutinizes DFID’s policies and spending and monitors organizations that receive DFID funding. All-Party Parliamentary Groups (APPGs) bring together members of parliament, the private sector, and non-governmental organizations on key policy issues, including on international development (e.g., the APPG on the UN Global Goals for Sustainable Development), and are influential in policymaking.
Other government departments: The Foreign and Commonwealth Office (FCO) provides development assistance particularly in the areas of conflict reduction, human rights, and climate change. The Ministry of Defense supports DFID’s work in fragile states and regions. Together, government departments other than DFID manage one-fifth of the UK’s ODA. This share is expected to increase from about 20% in FY2016/17 to 26% by FY2019/20.
Civil society: CSOs play a strong role in the development community in the UK. CSOs frequently engage with the government through formal and informal consultation processes. BOND, the UK’s membership body for development CSOs, has 450 members and has been key in maintaining the UK’s strong commitment to development. DFID provides funding to CSOs, both through its country offices and direct funding through DFID headquarters. According to DFID, CSOs implement around 20% of DFID’s bilateral programs.
Academia, think tanks, and the media: Academic institutions and think tanks play a significant role in the UK’s development policy. British medical journals (e.g., The Lancet, BMJ, PloS Medicine) place a strong emphasis on global health issues. The online version of the newspaper The Guardian has a designated section on development topics.
- How is the UK ODA budget structured?
DFID manages 80% of the UK’s ODA; this share is expected to decline
The Department for International Development (DFID) is the primary funder of the UK’s ODA. According to DFID data, in 2015, DFID contributions accounted for 80% of ODA. The remaining 20% is managed by other government departments, including the Foreign and Commonwealth Office (3%), the Department of Energy and Climate Change (3%), and the Department for Business, Innovations, and Skills (2%). The remaining 12% is drawn from across other ministries and also includes the UK’s contributions to the European Union. DFID estimates that the proportion of ODA to be spent by other departments could increase to 26% by FY2019/20.
DFID’s departmental expenditure limit (DEL) for FY2016/17 stood at £11.8 billion. This includes cross-government funds that come from DFID’s budget but are managed by other ministries. DFID planned to spend £10 billion through its various programs in FY2016-17 (i.e., not including cross-government funds). DFID’s ‘spending plan’ is broken down into 11 envelopes linked to different DFID divisions (see table below, based on data from ‘DFID’s Annual Reports and Accounts 2015-2016’). It is important to note that the spending plan is indicative. This means that DFID has the authority to make changes to its allocations and distribute funds to different programs and divisions throughout the year.
Overview: DFID's budget for FY2016/2017
Country and Regional Programs 4,259 6,507 East and Central Africa 1,497 2,287 Asia, Caribbean and Overseas 1,254 1,916 West and Southern Africa 819 1,251 Middle East and North Africa Division 688 1,051 Conflict, Stability and Security Fund 128 196 Middle East and North Africa 50 76 Asia, Caribbean and Overseas Territories 47 72 Conflict, Humanitarian, Security and Stabilization 20 31 Africa 10 15 Economic Development Division 2,145 3,277 International Finance Department 1,581 2,416 Private Sector Department 451 689 Growth and Resilience Department 99 151 Trade for Development 12 18 Multilateral Effectiveness Department 1 2 International Relations Division 1,058 1,617 Europe Department 420 642 EC Attribution/European Union 381 582 United Nations and Commonwealth Department 256 391 Global Partnerships Department 1 2 Global Funds Division 552 843 Policy Division 912 1,393 Research and Evidence Division 354 541 Crisis Reserve 200 306 Non-Department Public Bodies 26 40 Other Central Programs 7 11 Conflict, Humanitarian, Security and Stabilization Division 332 507 Total DFID (not including cross-government funds) 9,978 15,245
- What are important decision-making opportunities in the UK’s annual budget process?
Annual budget runs from March to June; final annual spending is determined in the fall
The UK’s budget process is different to that of many other donor countries, as government departments determine annual spending for budget lines based on a multi-year budget process.
The budget process usually begins with the Comprehensive Spending Review (CSR), which sets expenditure limits for government departments for the following five years. The CSR is usually released at the beginning of each new parliamentary term. The CSR development process is thus an important opportunity to shape the UK’s overall long-term funding levels for development.
The UK’s financial year runs from April to March:
- Chancellor presents annual budget to Parliament: Usually in March, the Chancellor of the Exchequer carries the budget speech to Parliament, detailing spending limits for each ministerial department. After the budget speech, members of parliament debate, for four consecutive days, different policy area such as health, education, or defense. These debates are known as the Budget Resolutions.
- DFID adjusts budget based on budget speech: Following the budget speech, DFID adjusts allocations during annual resource allocations rounds (RAR), when it realigns the annual budget within budget ceilings set by the Chancellor. DFID can also reallocate funding at this point to adapt to changing demands and to the speed with which different projects are implemented. RARs are conducted again at the end of the year following the Chancellor’s Autumn Statement in November (see below). Even after the RAR, the budget can be adjusted throughout the fiscal year as divisions respond to new priorities or unexpected delays in program delivery.
- Parliament debates and adopts the annual budget: Between May and June, MPs debate the budget resolutions and scrutinize the budget. However, Parliament does not amend any allocations within DFID’s budget, as it is not subject to parliamentary approval. The parliamentary International Development Select Committee debates and scrutinizes UK development policy, which can influence DFID policy and funding decisions, even if the committee has no power to decide on allocations.
- Chancellor makes Autumn Statement: The Chancellor’s Autumn Statement in November provides an update on funds available for ministerial departments. DFID makes final adjustments to its annual budget for the current fiscal year based on the Autumn Statement.
- How is ODA spent?
The UK is the largest donor to multilaterals; funding is determined by ‘value-for-money’ assessments
According to OECD DAC data, the UK was the largest provider of core contributions to multilateral organizations in 2015. Core funding to multilateral organizations amounted to US$6.8 billion. This corresponds to 37% of the UK’s total ODA. The largest recipients of this funding in 2015 were the European Union institutions (30%), the World Bank (28%), United Nations agencies (10%), the Global Fund to Fight AIDS, Tuberculosis and Malaria (Global Fund; 9%), and Gavi, the Vaccine Alliance (Gavi; 9%). In addition to core funding, the UK provided US$3.3 billion to multilateral organizations that was earmarked for specific programs or regions (this is reported as bilateral ODA). The remaining bilateral ODA (US$8.5 billion in 2015) is mainly implemented by the public sector including partner governments (28% of bilateral ODA), CSOs (22%), and private contractors (no exact percentage available).
In November 2016, the Department for International Development (DFID) published two cornerstone review documents that will shape the flows of bilateral and multilateral ODA. The Bilateral Development Review (BDR) assesses the composition of DFID’s bilateral portfolio, defining priority areas including security, migration, climate, and health. The Multilateral Development Review (MDR) mandates that DFID signs ‘performance agreements’ with multilateral organizations and restricts funding until agreed targets are met. 30% of the funding for UN development and humanitarian organizations will be allocated according to agreed performance targets.
In addition, DFID released the Civil Society Partnership Review in November 2016, which outlines four new mechanisms for CSO funding. These are:
- UK Aid Match: The government matches public donations to charity appeals by CSOs, up to a total of £30 million in a first funding round
- UK Aid Direct: Focuses on funding for small and medium CSOs; up to a total of £40 million available in a first funding round
- UK Aid Connect: Funds innovations and collaborations between CSOs, think thanks and organizations tackling ‘tomorrow’s challenges’
- UK Aid Volunteers: Offers targeted support to effective global volunteer programs
Who are the UK’s ODA recipients?
Bilateral ODA focuses on poorest countries; increased funding for fragile states and regions
According to data from the OECD’s Development Assistance Committee (DAC), the UK currently allocates the largest share of its bilateral ODA to sub-Saharan Africa (on average, 34% between 2013 and 2015), which is well above the average among DAC members (25%). Asia received the second-largest share (20%), also above the DAC average of 17%. Overall, the UK’s bilateral ODA focuses on low-income countries (LICs). The largest share of bilateral ODA (37%) between 2013 and 2015 went to LICs, well above the DAC average of 28%. The UK’s Aid Strategy calls for DFID to allocate at least half of its annual budget to fragile states and regions – this could signal a geographic re-focus and a shift in the future towards more funding for middle-income countries affected by conflict.
The UK’s 28 priority countries across Africa, Asia, and the Middle East:
- Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Liberia, Malawi, Mozambique, Nigeria, Rwanda, Sierra Leone, Somalia, South Sudan, Sudan, South Africa, Tanzania, Uganda, Zambia, Zimbabwe
- Bangladesh, Burma, India, Kyrgyzstan, Nepal, Tajikistan
- Afghanistan, Occupied Palestinian Territories, Pakistan
How is bilateral funding programmed?
Programming of DFID’s bilateral funding is highly decentralized
DFID manages the largest share of the UK’s ODA (80% in 2015). Programming of DFID’s bilateral funding is largely decentralized, as DFID’s country offices mostly manage program development. Programming is based on the Treasury’s Comprehensive Spending Review (CSR), which sets DFID’s budget for the parliamentary term. Based on the CSR, DFID sets out high-level priorities in its multi-year business Plan. Reflecting the Business Plan’s priorities, DFID’s country offices develop Operational Plans (OPs), which guide DFID’s bilateral cooperation in-country. An OP includes indicative multi-year budgets for ‘strategic pillars’ (e.g., health), including ‘results targets’ to be achieved by the end of the OP period. Once the OP is finalized, country offices will still have an opportunity to make adjustments during the annual budget process, based on the overall multi-year budget framework set by the CSR and DFID’s Business Plan. In addition, DFID headquarters originates and manages programs that go beyond the scope of a single country, such as specific thematic and regional initiatives.
How will the UK’s ODA develop?
- The UK government has pledged to continue to meet the UN target of spending 0.7% of its GNI on ODA. This means that ODA is likely to continue to grow in line with the growth of the UK economy.
- The UK is increasingly diversifying its ODA channels through cross-government funds: the Conflict, Stability and Security Fund to support global security, the ODA crisis reserve to support resilience and crisis response, and the Prosperity Fund to promote economic growth overseas and private sector opportunities. As a result, the proportion of ODA to be spent by departments other than DFID could increase to 26% by FY2019/20.
What will the UK’s ODA focus on?
- The UK Aid Strategy places a particular focus on fragile states and regions, on which DFID plans to spend at least half of its annual budget.
- Former DFID Secretary of State, Priti Patel, pledged to ‘challenge and reform’ the global development assistance system with an approach based on ‘core conservative principles’, wealth creation, and developing countries’ needing more investment and trade. How these priorities will change under current DFID Secretary of State Penny Mordaunt, appointed in November 2017, is unclear.. However, the government is already moving to increase its support to the CDC Group, the UK’s development finance institution, focusing on the private sector. In November 2016, a draft bill by Parliament was issued stating that the funding limit for the CDC Group could see a fourfold increase, from £1.5 billion to £6 billion.
- The Multilateral and Bilateral Development Reviews (both November 2016) offer insight into funding shifts and map out how ODA will be spent. According to the MDR, DFID plans to suspend or cut funding to multilateral organizations that do not meet pre-defined performance targets.
What are key opportunities in 2017 and 2018 for shaping the UK‘s development policy?
- In February 2017, Priti Patel, announced that the UK will host the next international Family Planning Summit in July 2017. This provides an opportunity to advocate for increased resources for family planning programs.
- In January 2017, Priti Patel released DFID’s first Economic Development Strategy, outlining how investing in economic development in developing countries will speed up national growth, trade, and industries. The strategy outlines the importance of global trade, job creation in fragile and conflict states, leveraging partnerships with businesses, tackling corruption, and mobilizing domestic resources. This presents an opportunity to engage with DFID and other UK development stakeholders to discuss approaches to implement the strategy in DFID’s partner countries.