TUC supports legislation on ODA

International Development Committee

Inquiry into Draft International Development (Official Development Assistance Target) Bill

TUC Submission

1. The TUC appreciates the opportunity to take part in the inquiry into Draft International Development (Official Development Assistance Target) Bill by the Department for International Development, expresses support for the proposed legislation and hopes that the UK Government's initiative will be emulated by other developed nations, especially, by G-8 countries.

2. The TUC and its affiliates have long supported increases in Official Development Assistance towards the UN-recommended target of 0.7% of Gross National Income, reiterated our position in previous submissions[1] and led the campaign for increased aid in the international trade union movement.

3. The TUC is of the view that the current commitments and disbursement arrangements are unsatisfactory, as agreements on ODA reached at global level are not binding on the donors. Despite the long-standing consensus on the need for increased aid, only five countries - Norway, Sweden, Denmark, the Netherlands and Luxemburg[2] - have consistently fulfilled the obligation. Their efforts alone, though exemplary and commendable, are inadequate[3] to make a significant impact on the growing needs for development finance. Despite the marked increase in 2005-2008 mostly attributable to exceptional factors, the ODA has not kept pace with the increase in the need for resources for development. In fact, total ODA disbursements[4] declined for most of the 1990s in both nominal and real terms.

The overall aims and scope of the draft Bill

4 The TUC is agreement with the overall aims and scope of the proposed bill and believes that it is in line with the position of the international trade union movement led by the International Trade Union Confederation (ITUC).

• Whether legislation is necessary to achieve the 0.7 % target in 2013 and beyond

5 It is nearly forty years since the consensus on the need to devote at least 0.7% of Gross National Income (GNI) was reached in the UN[5]. However, the trends in total ODA disbursements including those in UK contributions have in the past been rather erratic[6] and shown a tendency to even decrease in real terms. Therefore, we concur with the view that the enshrinement of the commitment in legislation could provide an appropriate guarantee for delivery of aid in adequate quantity[7]. However, it is to be noted that there is no absolute guarantee that any government will strictly adhere to it, for, all that is required under the proposed legislation, if adopted, is that the Secretary of State provides an explanation for the failure[8]. In our view, it would be more appropriate and, certainly, conducive to the achievement of objectives to ensure that any shortfall is carried forward to the subsequent year(s) within a period of three years. Some flexibility could be introduced by making sure that 0.7% of GNI is reached in terms of a moving average over a period of three years[9]. This would present a significant advantage for a government facing difficult financial decisions, as it would enable it to reduce the contribution, for example, for one year in the event of an economic downturn[10] and still be able to adhere to the requirement over the medium-term.

• Whether the proposed accountability measures contained in the draft Bill are sufficient

6 The compilation of national statistics and accounts has been standardized to a significant extent to ensure meaningful comparability and consistency within the OECD over the long-term. Moreover, there is consensus on what constitutes official development assistance. We are therefore in general agreement with the proposed accountability measures and safeguards. However, it is necessary to ensure that in line with the current consensus, the grant element[11] in ODA is at least 25%.

• The potential impact of the draft Bill on the actions of other donor countries in respect of meeting their ODA commitments

7 The UK is an important DAC member[12] and wields a great deal of influence on the formulation aid policies in the European Union and international financial institutions such as the World Bank and the IMF. The initiative by the UK to enshrine in legislation a duty or an obligation binding on the Secretary of State for International Development will set a precedent for other developed countries, notably, for other DAC members and is likely to be taken note of by them.

• Whether enshrining the ODA target in legislation is likely to affect the predictability of aid levels for developing countries

8 The predictability of aid has been a major concern for many developing countries, especially those highly dependent on aid. The issue has been given careful consideration in the debate leading up to the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action[13]. Many DAC donors including the UK indicated their willingness to enhance predictability and have, in some instances, striven hard to do so through various arrangements including the signing of Memoranda of Understanding[14]. In our view, the enactment of commitments will go some way towards improving general predictability of aid over the medium term, although commitments to specific countries and/or programmes/projects will not be directly affected by the proposed law. The IMF has long advocated enhanced predictability of aid as a means of supporting developing countries' efforts to strengthen public financial management systems.

• Whether the legislation is likely to affect poverty reduction objectives for ODA expenditure as set out in the International Development Act 2002

9 It will not have any adverse impact on poverty reduction[15], as the objective of the proposed legislation is to add certainty in quantitative terms to the flow of funds to be made available as ODA without making any qualitative changes regarding their use. The achievement of Millennium Development Goals (MDGs) is likely to be given prime consideration in the allocation of funds for countries and/programmes.

• The likely impact on the contribution to ODA from other government departments (ie non-Department for International Development ODA expenditure).

10 There is a commitment by the UK Government to ensure consistency[16] and congruency in action by all government departments contributing to the fulfillment of UK commitments to the official development assistance. We do hope that the Government will ensure that the departments responsible for the implementation of its policies on trade, investment, defence, environment, human rights etc take into account their possible impact on its development policies and the imperatives arising from the UK's commitments to ODA.

Annex I

UK Official Development Assistance

1961-2008 (Millions-in current USD)

Source: OECD DAC Statistics

Annex II

Total Official Development Assistance

1960-2008 (Millions - in current USD)

Source: OECD DAC Statistics

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[1] All Party Parliamentary Group for Debt, Aid and Trade, TUC Response to the Inquiry into Increasing Aid Finance, 2007

[2] The contributions from the five countries concerned were as follows in 2008. Denmark (0.82%) Luxemburg (0.92%), Netherlands (0.80%), Norway (0.88%), Sweden (0.98%), Net ODA, preliminary data, 30 March, 2009

[3] The total contribution from the five countries in 2008 amounted to some USD 18.889bn whereas the UK contribution alone at 0.7% would have been some USD 18.57bn for the same year.

[4] See Annex II

[5] Resolution 2626 adopted by UN General Assembly in October 1970 recommended 0.7% of GNI as ODA.

[6] See Annex 1

[7] In 2008, total DAC disbursements amounted to USD 121bn. At 0.7% of GNI, total disbursements would have been nearly USD 275bn.

[8] See para 3 of the proposed Bill

[9]

Example
	Year I	Year II	Year III	Moving Average
GNI	1000	998	1002
ODA	7	6	8
% of GNI	0.7	0.602	0.799	0.7

[10] It should be noted that the obligation to strictly adhere to .07% of GNI, is less onerous than it appears, as there is a commensurate drop in ODA in the event of an economic downturn

[11] UK has been a leading advocate of increased grant element in ODA and often adhered to its commitments in this regard.

[12] UK has been a DAC member since 1961.

[13] 'We will increase medium-term predictability of aid', Paris Declaration on aid effectiveness and the Accra Agenda for Action, OECD, para 26.

[14] See the ten-year MOU between the Government of Ethiopia and the UK signed in January 2003, under which the UK Government agreed to provide a substantial proportion of UK Development Assistance as direct budget support (at least £60m in the following 3 years).

[15] See emphasis on reduction of poverty, for instance, in Part I,(1)1, in International Development Act 2002

[16] See Section 3, Eliminating Poverty, Challenge for the 21^st Century, WP 1997