News Analysis: How the coalition plans to make the aid pennies count

25 Feb 11
The government is committed both to boosting overseas aid and ensuring the money is spent well. And that's where the new Independent Commission for Aid Impact comes in. Lucy Phillips reports

By Lucy Philips

28 February 2011

The government is committed both to boosting overseas aid and ensuring the money is spent well. And that’s where the new Independent Commission for Aid Impact comes in. Lucy Phillips reports

As one of only two departments to have its budget ring-fenced in October’s Comprehensive Spending Review, the Department for International Development is coming under increasing pressure to ensure overseas aid projects are meeting their objectives.

The pressure comes from both the coalition government and public opinion. Ministers are committed to increasing the department’s budget from £7.8bn this year to £11.3bn in 2013/14, while Ipsos Mori polls show little support for protecting overseas aid when domestic funding is being cut so severely.   

International Development Secretary Andrew Mitchell has made clear his intentions to boost the accountability of his department under these ‘privileged’ financial circumstances.

Shortly after coming into power, he declared that the overseas aid budget must be seen to be ‘well spent’ if ‘hard pressed taxpayers’ were to support it. Pledging to achieve ‘100 pence of value for every development pound spent’ he promptly introduced an ‘Aid Transparency Guarantee’, requiring the department to publish online all expenditure over £500.

He also set up a new watchdog, the Independent Commission for Aid Impact, to monitor spending. ‘I am dispensing with the ability to sweep things under the carpet,’ he said.

The ICAI has already been set up in shadow form and is due to be turned into a permanent body in May. It will report to Parliament through the Commons international development select committee – something that its predecessor, the Independent Advisory Committee on Development Impact did not do (it reported to the secretary of state).

The new watchdog is expected to produce around 20 reports a year, using a traffic light system to rate the effectiveness of aid programmes, with red for poor results and green for excellent.

The scope of its investigations is currently out for public consultation, which is due to close on April 6.

The ICAI’s chief commissioner is Graham Ward, whose CV includes stints as global utilities leader at PricewaterhouseCoopers, president of the International Federation of Accountants, president of the Institute of Chartered Accountants in England & Wales and several governance and auditing roles on the Financial Reporting Council. He is also currently vice chair of the World Energy Council.

Three other commissioners, including the leading Kenyan anti-corruption campaigner John Githongo, were appointed in early February, completing its set-up for now.

In one of Ward’s first interviews since his appointment in October, he tells Public Finance that his starting point for the commission is that ‘we will practise what we preach’. Providing value for money is ‘axiomatic’, he says, whether funds are short or plentiful, although he accepts there might be greater public interest when government finances are tight.

It is too early to see any trends emerging from the consultation, he says, which is getting a very good public response.  Aside from an initial focus on places where the most money is spent, Ward expects to cover ‘a good spread’ of overseas aid projects – ranging from budget support and education and disease eradication to tracking UK money spent through the European Commission, all in both stable and fragile states.

The three principles behind the work are that it will be ‘evidence-based, objective and constructive’, he says.

The increased scrutiny by the ICAI has been welcomed by the international development select committee. Along with the National Audit Office and Public Accounts Committee, it has produced years of reports highlighting missed targets by the department and other difficulties in demonstrating value for money in aid programmes. The committee’s most recent analysis of the department’s accounts warned that ensuring money was well spent would become more difficult as more of the aid budget is channelled towards war-torn states in line with a coalition commitment.

Development charities, including Oxfam and ActionAid, are also generally happy with the new independent ICAI, and its potential for greater transparency. Melissa Hall, policy officer at ActionAid, tells PF that any initial concern that the commission ‘represented views only from the UK’ and not from countries receiving aid had been alleviated by Githongo’s appointment.

‘That’s the kind of perspective we are looking for. Results have to be central to aid and development so having a Southern [Kenyan] expertise is fantastic,’ she adds.

But others view the ICAI with more caution, worrying that a focus on results might lead to a concentration of overseas aid spend on more measurable wins.

Simon Maxwell, a senior research associate at the Overseas Development Institute and a specialist adviser to the select committee, tells PF: ‘Although evaluation does have to focus on results it should not try to overreach itself… Some kinds of aid are more amenable to a relatively straightforward results-based focus than others. It’s much more difficult to evaluate budget support for a government, compared with projects to build a school or put children into primary education.

‘The proof of the pudding is whether they [the ICAI] are able to tackle these difficult issues and not simply do routine evaluation.’

Professor Lawrence Haddad, director of the Institute of Development Studies at the University of Sussex, says that while the ICAI’s independence from the international development department ‘strengthens its ability to be hard-hitting’, the watchdog must get the balance right between ‘the audit and the development impact side of the value-for-money equation’.

 He adds: ‘The risk of a stronger audit culture is that we measure what is most amenable, and not what is most meaningful. That risk can be managed and it must.’

Ward is pragmatic about the difficulties of demonstrating the effectiveness of programmes to improve governance for example, compared with straightforward provision of equipment or buildings.   

He says: ‘These things will have hiccups and we have to develop ways of working to make sure we can be practical and realistic... one of the aspects of evaluation is that you don’t arrive at simple black-and-white answers.’

He notes the particular importance of taking this approach to war-torn states. ‘You could build a hospital one moment and somebody bombs it the next... I don’t think that means it’s not worth doing. It shows that you have to look holistically at what’s being done.’

Ward adds that the watchdog would be unlikely to ‘go so far as to saying you should pull out of this particular project’ but clear messages and recommendations would come out of each report, with departments expected to respond within three weeks. ‘If our recommendations are not being followed through, the [select] committee will want to know why. There’s some pretty powerful incentives to make sure things do happen,’ he says.

Graham Ward is speaking at CIPFA’s international conference on March 15–17

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