- The United Kingdom (UK) is the third-largest donor country, spending US$18.1 billion on net official development assistance (ODA) in 2016 (in 2016 prices).
- In 2013, the UK became the first group of seven (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) new Secretary of State, Penny Mordaunt, in office since November 2017, have reaffirmed this commitment.
- DFID is the main provider of the UK’s ODA, managing 74% of total spending in 2016, down from 86% in 2014, according to UK government data. 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 development strategy, ‘UK aid: tackling global challenges in the national interest’, 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 ensures that it allocates at least half of its budget to fragile states and regions. Its leadership emphasizes ‘Brexit-ready’ plans to use ODA more strongly to advance the UK’s trade interests.
- The Bilateral Development Review (BDR) and Multilateral Development Review (MDR), both published in December 2016, play key roles in shaping the UK’s bilateral and multilateral approaches to allocating development funding.
- Given the UK’s emphasis on greater cross-government allocation of ODA, there may be increasing avenues to shape UK development efforts through engagement with actors outside of DFID, such as the Foreign and Commonwealth Office (FCO) and the Department for International Trade (DIT).
- Mordaunt has highlighted disability issues and announced the UK will host the Global Disability Summit in July 2018. This may present opportunities for organizations working in that field.
- The UK has outlined new strategies for nutrition (October 2017) and education (January 2018), which may present opportunities for organizations that emphasize new focuses in those sectors, including teacher training and nutrition for pregnant women and children up to two years of age.
the big six
- How much ODA does the UK provide?
The UK is the 3rd-largest donor country; 0.7% target enshrined into law since 2015
The UK is the third-largest donor country, after the United States and Germany. According to data from the Organisation for Economic Co-operation and Development (OECD), net ODA stood at US$18.1 billion in 2016 (in 2016 prices). ODA has gradually increased since 2012 and saw a 9% increase between 2015 and 2016. In 2013, the UK became the first G7 country to achieve the UN target of spending 0.7% of its 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.
DFID is the main implementing agency for development assistance: According to the UK government ‘Statistics on International Development’, DFID managed 74% of the country’s ODA in 2016. 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’s ODA budget structured?’). According to the Parliament’s International Development Committee, DFID’s share of ODA spending is expected to further decline to about 70% by 2020.
- What are the UK‘s strategic priorities for development?
The UK’s development assistance is putting an increasing focus on fragile states and regions
The UK development strategy (‘UK aid: tackling global challenges in the national interest’), released in 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 the box). The UK focuses 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 in line with this priority. Under newly appointed DFID secretary Penny Mordaunt, issues related to disabilities are also expected to be a priority, owing to her interest in disability rights and inclusivity.
Global health is another focus of the UK’s development policy. According to OECD data, the UK spent around US$2.7 billion on global health in 2015 (the most recent year for which complete data is available), 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; It 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 bilateral ODA from the UK in 2016 was humanitarian assistance (15%). This reflects the UK’s focus on strengthening responses to crises in fragile states and regions. Global health was the second-ranked sector, at 12% of bilateral ODA in 2016, followed by education (11%). Education grew rapidly between 2015 and 2016, increasing by 45%, or from US$898 million to US$1.3 billion.
The UK’s four strategic priorities for development (as outlined in 2015 development strategy):
- Strengthening global peace, security, and governance: At least 50% of DFID’s annual budget will be spent in fragile states and regions; a Conflict Stability and Security Fund to be established (£1.2 billion for FY2017-18).
- Strengthening resilience and response to crisis: £500 million ODA crisis reserve will be established to enable rapid response to emergencies.
- Promoting global prosperity: £1.3 billion Prosperity Fund will be set up to promote economic reforms and improve business climate in developing countries, in response to DFID’s Economic Development Strategy that highlights a stronger role for the UK’s development finance institution specialized in private sector finance, the CDC group.
- Tackling extreme poverty and helping the world’s most vulnerable: Focus on eliminating extreme poverty by 2030, supporting the world’s most vulnerable 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 December 2016, assesses 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, assesses 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 that have demonstrated 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 key review, released in November 2016, assesses the role, funding options, and effectiveness of civil society organizations (CSOs) in the UK. 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 question six ‘How is ODA spent?’).
DFID’s Economic Development Strategy, released in early 2017, will continue to 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 UK’s development finance institution, the CDC Group, within the UK’s development programs. In line with that strategy, DFID announced in October 2017 that it would channel up to £703 million per year (US$949 million) for five years through CDC. The move followed the passage of legislation in February 2017 that quadrupled the total funding the CDC Group can receive from the UK government from £1.5 billion to £6 billion (US$8.1 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 currently has a minority government headed by the Conservative Party under Prime Minister Theresa May and supported by the Democratic Unionist Party (DUP) of Northern Ireland. The prime minister can exercise significant influence over development policy, for example through funding commitments for international initiatives, though the degree of involvement varies in practice. The Department for International Development (DFID) leads on strategy setting and funding decisions for the UK’s development policy. DFID has been headed by the Secretary of State for International Development, Penny Mordaunt, since November 2017. She replaced Priti Patel, who resigned over undisclosed meetings she attended in Israel. DFID’s Executive Management Committee, chaired by the Permanent Secretary for International Development, Matthew Rycroft, since January 2018, oversees implementation and is accountable for ensuring that DFID departments deliver results consistent with ministerial priorities. DFID has about 2,700 employees and implements programs in 28 priority countries 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) are influential in policymaking, bringing together members of Parliament, the private sector, and civil society organizations (CSOs) on key policy issues, including on international development (e.g., the APPG on the UN Global Goals for Sustainable Development).
Other government departments: The Foreign and Commonwealth Office provides funding 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 managed 26% of the UK’s ODA in 2016. This share is expected to further increase to about 30% by 2020.
Civil society: CSOs in the UK play a strong role in implementing development funding and shaping the agenda. They 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 as direct funding through DFID headquarters. According to OECD data, CSOs implement 19% of DFID’s bilateral programs, above the 16% average among countries in the OECD’s Development Assistance Committee (DAC).
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’, ‘The 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 74% of the UK’s ODA; this share is expected to decline to 70% by 2020
The Department for International Development (DFID) is the primary funder of the UK’s ODA. According to the UK government document ‘Statistics on International Development’, DFID contributions accounted for 74% of ODA in 2016. The remaining 26% is managed by other government departments, including the Department of Business, Energy, & Industrial Strategy (BEIS; 5.2%); the Conflict, Stability and Security Fund (CSSF; 4.5%); the Foreign and Commonwealth Office (3.8%); and the Home Office (2.7%). The remaining 10% is drawn from across other ministries and includes the UK’s contributions to the European Union’s development funding (3.6% of total ODA in 2016). According to the UK Parliament’s International Development Committee, the UK government expects DFID’s share of ODA to further decline to about 70% by 2020.
DFID plans to spend £10.3 billion (US$13.9 billion) through its various programs in fiscal year (FY) 2017-18 (see table below, based on data from ‘DFID’s Annual Reports and Accounts 2016-2017’). 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 FY2017-2018
Country and Regional Programs 4,040 5,455 East and Central Africa Division 1,425 1,924 Asia, Caribbean and Overseas Territories Division 1,190 1,607 West and Southern Africa Division 797 1,076 Middle East and North Africa Division 628 848 Policy, Priorities, International Organisations and Humanitarian 5,909 7,978 Research and Evidence Division 425 574 Economic Development Division 2,165 2,923 International Relations Division 1,349 1,821 Policy Division 771 1,041 Global Funds Division 812 1,096 Conflict, Humanitarian, Security and Stabilization Division 387 523 Conflict, Stability and Security Fund 97 131 Non-Departmental Public Bodies 27 36 Other Central Programs 10 14 Crisis Reserve (central reserve) 200 270 Total DFID (not including cross-government funds) 10,283 13,884
- What are important decision-making opportunities in the UK’s annual budget process?
Annual budgets run from April to March; final annual spending is determined in autumn
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 (Chancellor) presents 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 areas such as health, education, or defense. These debates are known as the ‘Budget Resolutions’.
- DFID adjusts budget based on budget speech: Following the Chancellor’s budget speech, the Department for International Development (DFID) begins annual resource allocation rounds (RAR) to adjust allocations of its annual budget to align with the budget ceiling 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 (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, members of Parliament 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 data, the UK was the largest provider of core contributions to multilateral organizations in 2016. Core funding to multilateral organizations amounted to US$6.5 billion that year. This corresponds to 36% of the UK’s total ODA. The largest recipients of this funding in 2016 were the European Union institutions (31%), the World Bank (24%), and UN agencies (10%). In addition to core funding, the UK provided US$3.5 billion to multilateral organizations that was earmarked for specific programs or regions (this is reported as bilateral ODA, which in total amounted to US$11.7 billion in 2016). The UK’s bilateral ODA is mainly implemented by the public sector, including partner governments (28%), and civil society organizations (CSOs; 19%).
In December 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, and defines 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 is to 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 (US$41 million) in a first funding round.
- UK Aid Direct: Focuses on funding for small and medium CSOs; up to a total of £40 million (US$54 million) available in a first funding round.
- UK Aid Connect: Funds innovations and collaborations between CSOs, think thanks, and other 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 32% between 2014 and 2016), which is well above the average among DAC members (22%). Asia received the second-largest share (17%), slightly above the DAC average of 14%.
Overall, the UK’s bilateral ODA focuses on low-income countries (LICs). The largest share of bilateral ODA (34%) between 2014 and 2016 went to LICs, well above the DAC average of 25%. The UK’s development strategy, ‘UK aid: tackling global challenges in the national interest’, published in 2015, calls for DFID to allocate at least half of its annual budget to fragile states and regions. According to DFID’s own Annual Report and Accounts 2016-17 (the most recent available), 57% of its budget went toward fragile states and regions in 2015. The independent organization ‘Development Initiatives’ suggests that this target may not result in a major shift in funding, given that DFID was already achieving the target before the new development strategy.
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, Yemen
How is bilateral funding programmed?
Programming of DFID’s bilateral funding is highly decentralized
DFID manages almost three-quarters of the UK’s ODA (see question four: ‘How is the UK’s budget structured?’). 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 within the partner 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 in absolute terms is likely to continue to grow in line with the growth of the UK economy. Based on European Commission forecasts of the UK’s GNI, maintaining the 0.7% target would result in net ODA of approximately US$19.4 billion in 2018 (in 2016 prices), up from US$18.7 billion in 2017.
- 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 and private sector opportunities overseas. As a result, the proportion of ODA to be spent by departments other than the Department for International Development (DFID) could increase to 30% by the end of the current Spending Review period in 2020.
What will the UK’s ODA focus on?
- The UK development strategy, ‘UK aid: tackling global challenges in the national interest’, focuses on fragile states and regions, on which DFID plans to spend at least half of its annual budget. DFID’s own data indicates it more than reached this target in the very first year of the new strategy, 2015 (which is also the most recent year for which such data is available).
- Support to the private sector in partner countries is poised to increase significantly following DFID’s October 2017 announcement that it will channel £703 million per year (about US$949 million) for five years through the CDC Group. State Secretary Penny Mordaunt has also emphasized ‘Brexit-ready’ plans to use ODA more strongly to advance the UK’s trade interests but has rejected the use of ‘tied aid’ to achieve this objective.
- The Multilateral and Bilateral Development Reviews (both December 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 a November 2017 speech, Mordaunt announced that the UK will host the Global Disability Summit in July 2018. This issue is likely to become a priority in DFID given Mordaunt’s expression of interest in disability rights. Through the summit she intends to influence global leaders and technology companies to find new ways of supporting people with disabilities.
- DFID published new strategies on global education (‘DFID Education Policy 2018: Get Children Learning’) and nutrition (‘Saving lives, investing in future generations and building prosperity – the UK’s Global Nutrition Position Paper’) in January 2018 and October 2017 respectively. Both strategies may provide opportunities to leverage more development resources for the priorities they outline, which include teacher training, education-system accountability, and nutrition efforts that emphasize the ‘1000-day window’ from conception to two years of age.
- The UK’s emphasis on greater cross-government allocation of ODA may open opportunities to influence UK development efforts through actors outside of DFID, such as the Foreign and Commonwealth Office; the Department for International Trade; the Department of Business, Energy, & Industrial Strategy; and the National Health Service (NHS).