Justine Greening, Secretary of State for International Development, has announced that from 2015 the UK will no longer give £19 million a year in aid to South Africa, the 29th wealthiest country in the world. As well as being a fellow member of the G20, South Africa has an annual GDP (PPP) of $555.1 billion.
In a desperate attempt to get a soundbyte into the press, Shadow Secretary of State for International Development Ivan Lewis managed to showhorn a reference to apartheid into his criticism.
Of course, £19 million is a very small amount of the total DfID budget, but it is not an inconsequential amount when budgets are being squeezed all around the country thanks to the legacy of the Labour government’s profligate spending
The Conservative party, having committed to ring-fencing the aid budget in the spending review, are now stuck with a rapidly growing behemoth of a department which has no incentive to fiscal responsibility. While almost every other department must justify every pound it spends, the DfID budget is growing by almost 50% to £10.2 billion by 2014/15.
A department with such lofty aspirations as the irradication of poverty and a global vacination programme will always find new ways to spend taxpayers’ money. There is no limit to the projects that can be imagined and funded around the world in pursuit of these aims. Once established, the recipients of this funding are unlikely to want the ready supply of cash to cease. Every pound cut from aid means another pound that the country must find in their budget.
Irresponsible leaders would rather spend on vanity projects such as the Indian space programme while we pay for their schools. Although there will be opposition and difficult decisions to make, these leaders must be forced to make the correct fiscal choices for their citizens.
While the ring-fence around aid spending remains, our priority must be maximising the effectiveness of the budget. The current system, while undoubtedly well-intentioned, creates too many perverse incentives for the recipients of aid. Why would countries like Pakistan divert funds from their defence budget to their education budget when they know other countries can be guilt-tripped into paying for their schools?
Despite what the vested interests of lobbying NGOs may say, the best way for developing countries to achieve prosperity is through free trade, not huge international subsidies. For this reason, we must create policy solutions that will encourage private sector investment in these countries, creating jobs and reducing poverty.
Both sides of the aid debate can find anecdotal evidence to ‘prove’ that aid spending is either vitally important, or a collosal waste of limited resources. As with all government spending, we should look at the outcomes and not the intentions. Those in favour of increasing aid spending refuse to accept the unintended consequences such as propped-up dictators, massive fraud and entrenched poverty. This does nothing to solve these endemic problems.
We cannot continue to ignore the problems inherent in a ring-fenced aid budget. Instead, we need a mature discussion about how to create the maximum amount of prosperity while being fiscally responsible in a time of difficult economic decisions.
Frank Manning is Director of Communications for Parliament Street. He is @BillyManning on Twitter.
