Britain’s new foreign development chief thinks trade should trump aid

Indian Prime Minister Narendra Modi is greeted by British MP Priti Patel, now head of DFID, at Heathrow Airport in 2015. (Photo: Wikimedia)

Britain’s new head of international aid and development, Priti Patel, supported Brexit and thinks the traditional approach to fighting poverty should give way to a heavier emphasis on trade.

Nearly everyone agrees both are necessary to make progress against poverty, anywhere. But given Patel’s statements in the past and extremely conservative positions on other issues, many Britons are concerned that she will shift the balance so far in favor of commerce that the world’s poorest will suffer.

This shift in priorities may have significance well beyond the U.K. due to the leading role Britain often plays in setting the international anti-poverty agenda.

Patel, new chief of the U.K.’s Department of International Development (DFID) under Prime Minister Theresa May, looks to some observers as downright hostile to traditional foreign aid. In 2013, The Independent reported, Patel even suggested scrapping the department she now heads.

“A long-term strategic assessment is required, including the consideration to replace DfID with a Department for International Trade and Development in order to enable the U.K. to focus on enhancing trade with the developing world and seek out new investment opportunities in the global race,” Patel said in 2013.

She added, “It is possible to bring more prosperity to the developing world and enable greater wealth transfers to be made from the U.K. by fostering greater trade and private sector investment opportunities.”

Other members of Parliament, including Peter Bone, Conservative MP for Wellingborough, have also spoken about using the aid budget to promote British business interest.

“If at the end of the day we pay less on aid to developing countries but allow more of their goods to be sent to Britain then it would have a far better impact,” Bone told the Telegraph. “If we want to solve problems in developing counties the real answer is trade, not aid.”

Andrew Bridgen, the Conservative MP for North West Leicestershire, suggested that aid encourages dependency. “I am a big supporter of trade not aid, I believe in the saying ‘If you give someone fish you feed them for a day, if you teach them to fish you feed them for a lifetime’. Misspending U.K. taxpayers’ money aids nobody,” Bridgen also told the Telegraph.

Though rules prevent Britain from tying foreign aid to trade deals, Patel has hinted at using Britain’s £11 billion aid budget to leverage advantageous post-Brexit trade deals, saying U.K. aid was “helping to create millions of jobs in countries across the developing world – our trading partners of the future”.

She has also not helped her cause by appointing Richard Oxley as her special advisor. Oxley was the former head of media at Vote Leave and has also been an ardent critic of DFID in the past.

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Stephen Doughty, a Labour MP on the Commons international development committee, expressed concern that both will pursue an overtly anti-aid agenda once in office. “These are two of the most ideological critics of aid. They’ve got an agenda to pursue – against the very department they’re in,” Doughty told the Guardian.

In some ways Priti Patel is not exactly going against the core aims of aid as driving economic development. The Organization for Economic Cooperation and Development (OECD) describes aid as being the “flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective”.

Taken in this light, pursuing trade deals can constitute development assistance. In the past few years DFID has sought to combine the two, championing the private sector as drivers of social change.

Any approach towards private sector involvement wouldn’t exactly be a new move for DFID. Under former secretary, Justine Greening, DFID earmarked £735 million towards the CDC Group, the British development finance institution that specializes in private sector funding, with the aim of reducing poverty and ending aid dependency.

DFID justified the deal at the time, arguing that a more pro-market approach would help countries use trade as a vehicle for ending poverty. “This will ensure countries can grow and trade their way out of poverty while building future markets that British businesses can compete in,” DFID said in a press release last year.

With DFID increasing its contracts to companies such as Mott MacDonald and Adam Smith International in recent years, some were already worried that the aid budget had been co-opted.

DFID’s move towards the private sector was criticized by the Independent Commission for Aid Impact for viewing the private sector as a “development panacea.” The commission expressed worry that DFID’s change of policy was not providing benefit to the world’s poorest.

“The whole point has to be that the poor are protected and that involves looking at unintended consequences – and that requires very complex analysis and specialized skills,” commissioner Diana Good told the Guardian.

This policy shift has already served the interests of private companies. In 2012, DFID launched the Pearson Affordable Learning Fund in partnership with Pearson, a British multinational publishing and education company. DFID also has invested £35 million in HANSHEP, a scheme which serves to “mobilize private investments into the healthcare sector” and expand market access to private sector health companies in the developing world.

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A report in 2015 by Global Justice Now argues that the privatization of social development has led to companies such as Pearson profiting from expanded access to developing markets. The preference for British companies’ involvement in social development can be described as “tied aid.”

Tied aid is described by the OECD as being “official grants or loans that limit procurement to companies in the donor country or in a small group of countries”.

The OECD adds to this, saying that untied aid is actually more efficient and value for money. It argues that tied aid “can increase the costs of a development project by as much as 15 to 30 percent”.

In 2000 the then secretary of state for international development, Clare Short argued for the untying of British aid, claiming that it would serve the development agendas of developing countries better.

“There is clear evidence that untied aid is more efficient and can be used to support what countries need rather than a donor driven agenda,” said Short adding that “our [British aid’s] goal is that all development assistance should be untied.” OECD believes that untying aid is more efficient and can decrease overall spend by procuring local services that in turn build local economies.

Over the years DFID’s core policies have evolved and changed. From a department that once focused on the needs of the world’s poorest first before national interest to one with increased private sector involvement in social development. In a speech in 2015, Greening argued that “the U.K.’s international development policy is not only the right thing to do but also the smart thing to do for Britain’s national interest.”

Much of what Patel has said in the past goes a step further, advocating a system where economic development will trickle down and provide social impact for all. The problem with a “trade not aid” agenda is that it ignores the vital building blocks of development that allows countries to grow as an economy and become valuable trading partners.

While Greening’s approach sought to bring in the private sector to invest in the health and education of the poorest countries, Patel’s approach might not offer the slightest bit of assistance. It is likely that any trade investments would be made with viable economies worth trading with.

Writing for the Guardian this week, Aditya Chakrabortty worries that “cash earmarked to help people in poor countries will instead be offered to leaders of middle-income giants such as India, China and South Africa, to get them to buy British exports.” This approach clearly would fail the world’s poorest.

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Charlie Ensor

Charlie Ensor is a Nairobi-based freelance journalist, focusing on refugee rights, development and humanitarian crises in East Africa. His work has also featured on the Guardian and WhyDev; he also writes his own blog on development and aid issues. Charlie tweets @charlieensor, and you can contact him at charlieensor1990@googlemail.com

  • Morgeo

    Well when the DWP, her old dept say that they cannot afford to pay the minority of pensioners abroad their rightful paid for pension uprating which is discrimination and fraud when they have all paid their contributions for the full pension in the same way as the 96% of pensioners worldwide who all enjoy the indexed pension.
    Using some of the overseas aid money could solve this problem as it only requires just over half a billion out of the 11 billion and would show the countries concerned that the UK government believe in fairness especially in the Commonwealth where most of the pensioners live as some have supported these pensioners in part.

  • Charlie Ensor

    but do you think that fungibility is necessarily the answer? The 0.7 per cent we spent on aid is enshrined into British law. It cannot be used for other, non-aid purposes. Tackling pension deficits surely is the work of HMRC and reenvisioning a better system for pensioners. The two are completely separate