The way UK aid is spent by the British Government is changing, and changing fast. More and more of the growing budget is being spent outside of the Department for International Development (DfID).
Meanwhile, the focus of UK development assistance is increasingly "beyond aid", influencing international norms and standards to create a more level playing field for developing countries and helping them to mobilise other forms of financing – such as remittances, trade flows and private investment – rather than relying on development assistance.
This Whitehall-wide shift offers new opportunities to help the global poor, but also brings new, complex, challenges.
Mark Lowcock interview: the Department for International Development perm sec on the new Aid Strateg
Reimagine aid allocation
One high-profile area in which the government, through its new Aid Strategy, has committed to a "beyond aid" approach is in international tax avoidance and evasion, where DfID has worked with the Treasury to help developing countries gain a voice in the international forums where these problems are addressed.
In a number of areas, the UK government has been a global leader in the fight against international tax evasion.
For example, it has pledged to create a public registry of beneficial ownership (the people who stand to benefit from trusts and complex corporate structures). By increasing transparency, this measure is designed to make it more difficult to launder money and avoid tax. In this case, UK policy has benefits to offer to developing countries.
But the UK’s interests do not always correspond with those of developing countries. What happens when there is a clash?
Here, the concept of "policy coherence for development" comes into play. Under the United Nations' Global Goals, which provide the framework for development cooperation, the UK has an obligation to consider whether its international policies in areas such trade, security and immigration are consistent with its development goals. This means civil servants working across government must assess whether policies have any inadvertent negative impact on developing countries.
In our most recent review – "UK aid’s contribution to tackling tax avoidance and evasion" – we found that DfID has not actively pursued policy coherence for development in the international tax arena. Our findings echo those of parliament’s International Development Committee and the OECD, which have both encouraged DfID to do more in this area
We found that DfID had made a number of efforts to help developing countries benefit from reforms to the international tax system. However, developing countries have more basic concerns about the system, which they believe is tilted in favour of wealthy countries at the expense of poor ones. Where tensions between UK and developing country interests have arisen, DfID has chosen not to engage with these thorny topics.
Of course, the UK government has every right to protect its own interests – particularly as the new Aid Strategy makes it clear that UK aid should be in the “national interest”. Policy coherence for development does not mean that the wishes of developing countries will always prevail.
However it does put an obligation on DfID to take steps to understand the impact of UK tax policies on developing countries and to make informed judgments about whether to raise areas of tension in cross-government dialogue.
Currently it is not doing so. Indeed, DfID has never set out clearly what role it expects its central policy teams to play on policy coherence for development.
So although our review does not tell DfID what position it should take on international tax – that is a political decision which is beyond our remit – it does urge the department, and the whole of government, to be more proactive at how it looks at the coherence of its international engagement and the implications for developing countries.
If government were to explore how UK tax policies impact on developing countries, it is entirely possible that it would identify "win-win" situations where small changes to UK tax rules could have substantial benefits to developing countries without much cost to the UK.
Influencing the international tax agenda, and policy coherence for development more generally, is a new frontier for DfID, and a challenging one. It calls for the department to become more confident in raising development issues in cross-Whitehall debates. But this is an important part of making the UK a global leader on "beyond aid" development cooperation.