EU Foreign Aid wasted...quelle surprise!

We watched Fareed on CNN International last Sunday. He touched upon the budget cuts at the BBC World Service from which, he said, he learnt his English. I had previously thought that the funding for this would be transferred to DFID from the Foreign Office as a piece of creative accounting that would show an F&CO budget reduction and help to justify the ring fencing of the DFID budget. Wrong! Fareed told us that until now the BBC WS has broadcast to the world in 69 different languages. And now? The British Council, which is one of the few aid agencies that can show measurable results, is going the same way.

But Dave persists with his ring fencing of the DFID budget.

At last overseas aid is reaching the front pages, with even the tabloids taking an interest. This time it’s the EU getting a caning – and what few people realise is that £1.4 million of UK aid is channelled through Brussels as ‘multi-lateral’ aid i.e. they can spend it as they wish.

The performance is appalling, something we have known for years. Only 46% of EU aid reaches lower income countries compared with 74% of UK aid. EU aid is also subject to unnecessary administration and transaction costs, with money being recycled between national governments, the EU and other international bodies (such as the United Nations or World Bank) up to three times before it reaches those in need.

I get a daily bulletin from Open Europe, a think-tank that scrutinises the antics of the Fourth Reich. Here is their latest:

“While development aid can have a real impact, the EU’s aid budget suffers from poor accountability, unnecessary bureaucracy and, most critically, less than half the money spent actually goes to the world’s poorest people. Old colonial links and regional proximity, rather than fighting global poverty, continue to determine the destination of most EU aid.”

“There’s no conclusive evidence that the EU adds value to national aid programmes that are already performing relatively well, such as the UK’s aid spending. National contributions to the EU aid budget should be made voluntary with the Commission primarily playing a coordinating role, encouraging best practice and coherent policies among member states.”

“At a time when funds are tight it is vital that national governments get value for money from their aid spending. Unfortunately, when it comes to accountability, money spent via Brussels too often falls into a black hole between member states and the European Commission.”

UK currently contributes £1,424m to EU external aid spending, around 18% of the UK’s £7,767m total aid budget. - Money spent as EU aid continues to be poorly targeted at tackling poverty. Only 46% of EU aid reached lower income countries in 2009, compared with 74% of UK aid and 58% of EU member state governments’ aid.

From 2000-2009, developing European countries received $10.49 per capita, while Sub-Saharan Africa received only $3.94 per capita. Turkey was the top recipient of EU aid in 2009 which is unbelievable; Turkey is a middle income country with a booming economy. Danegeld, perhaps?

EU aid, which is managed by the European Commission, currently has administration costs of 5.4%, which are higher than the UK’s Department for International Development’s (DFID) costs of 4%, and the UK Government’s target of reducing these to 2% by 2014-15. Some EU aid streams, such as the programme for African, Caribbean and Pacific countries, have administration costs as high as 8.6% - above the ceiling the UK imposes when giving grants to NGOs.

€1.4bn or 10% of EU aid is needlessly passed on to other multilateral donors every year, such as the UN and World Bank. This money is simply being recycled between donors – up to three times in some cases – before it reaches a recipient country and is subject to unnecessary administration and transaction costs. In 2009, the Commission also agreed to ‘delegate’ €242.7m worth of aid spending back to the EU’s national governments, which begs the question why the money was ever given to the EU by member states in the first place.

EU aid is too often not aligned with other EU policies. For example, in 2008, the Commission established a migration centre in Mali to provide support to migrants seeking temporary jobs in the EU. However, with only Spain having signed a migration agreement with Mali, the €10m centre has helped only six Malians find work in Europe.

The EU’s current drive to transfer up to 50% of its aid directly to recipient governments’ treasuries, through ‘budget support’, rather than pre-agreed projects means that the EU risks donating money directly to discredited or illegitimate regimes. I have not been able to discern any audit trail for ‘DBS’ funding; I did suggest to Andrew Mitchell, the DFID Minister, that the donor agency should have its own auditor in situ whenever DBS is granted. We shall see – or not.

Some aid funding does not even leave the EU, or even Brussels. In 2009 alone, the EU granted a Brussels-based communications agency nearly €500,000 to produce various promotional brochures and campaigns. This included €90,000 to co-ordinate an “I fight poverty” music contest amongst young people in Europe, to increase “development awareness”.

It was ever thus.

The Report seems to have kicked up the perfect storm in Europe and a debate has been set down in the Dutch Parliament. It will be another case of plus ca change.

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