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Coffee House

Why Britain can’t use foreign aid money to help Somerset

8 February 2014

1:09 PM

8 February 2014

1:09 PM

Should Britain’s foreign aid budget be raided to help homes hit by the flood? There are plenty calls for this today, making the splash of the Daily Mail (below).Bf5jjfkCcAAAUo3.jpg-large A local MP, Ian Liddell-Grainger, says:-

“We send money all over the world now we need to give people down here the hope that they will get what they need. We should divert some of it down here. We don’t have to divert it forever, but we need it now.”

But this demand is based on a misunderstanding of how aid money is allocated. David Cameron’s commitment to double the aid budget until it is equivalent to 0.7 per cent of Gross National Income has another caveat: that ‘aid’ will not be defined by him, but by the OECD. This makes it impossible for aid to be diverted from DFID’s budget to other Budgets  – even the reconstruction side of the military – as the bean-counters in Paris wouldn’t categorise it as ‘Overseas Development Assistance.’

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The most un-British part of this target is that it only recognizes government aid. The target pays no attention to whether the country’s people donate generously themselves. Britain has, historically, been a strikingly generous and globally-minded country – we didn’t need the taxman’s help to hit this 0.7pc target. So Cameron’s policy was the precise opposite of his “Big Society” premise: it placed trust in governmet, and was blind to the efforts of people. The risk, of course, is that this erodes public donations to overseas charities as Brits think (with some justification) that this is what we pay our taxes for nowadays. So it’s quite possible that Cameron’s target ends up with Britain giving less in aid because private donations will drop off. So a Conservative PM will have, in effect, nationalized overseas aid giving and choked off an old an proud British tradition.

As Nigel Lawson says in a letter to the Spectator  this week, pouring cash into countries with corrupt regimes can not only fail to help, but cause active harm. That’s why I am so opposed to the aid target. Look at its history – it is an idea proposed by the United Nations in 1960, imposed it in 2014 – having failed to learn the many lessons of developmental economics in the decades in between. These lessons are brilliant summed up by Daron Acemoglu and James A. Robinson, authors of Why Nations Fail, in a Spectator article last month.

In 2007 Cameron visited Rwanda – and was asked by one of the African reporters why he in his flood-struck constituency. Afrcian economists like Dambisa Moyo have asked if Western aid is more to do with moral grandstanding at home than helping Africa (which, she says, it has signally failed to do). The decision to double the aid budget while not being able to afford to dredge rivers in home doesn’t make sense to anyone – so the questions keep coming. But for as long as this aid target remains in place, there will be no sensible answers.

One final thing. In his Spectator interview, Cameron was raving about Why Nations Fail – a book which points out the damage done by aid targets. My hunch is that Cameron’s own views on overseas development run contrary to the 0.7 per cent target he was pressurised into signing all those years ago. But I’m not sure that he’ll do anything about it.

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