New study - The Ghost of 0.7%

Foreign aid target of 0.7% of GDP is based on a discredited theory, using the wrong data; it should be scrapped – new report

When the three leading candidates in the General Election face off tonight, they are likely to agree on one thing: that Britain should increase its “aid” budget to 0.7% of GDP.

Yet a Center for Global Development report republished today in a British edition by International Policy Network, a development think tank based in London, demolishes the idea behind such a target. Key points of the report:

• The 0.7% target was formulated as a lobbying tool in the late ‘60s.
• The justification for the 0.7% “need” (so called “financing gap theory”) has lost all credibility.
• Even if the justification were sound, the figures on which it relies are forty years out of date. Recalculating with up-to-date statistics shows the “capital need” in poor countries has fallen to below 0.05% of national income in rich countries – less than 10 per cent of the aid that is currently being spent under the Labour government.

• The UK’s development policy should adapt to the changing circumstances. Tying spending to a discredited 40-year old target dreamt up by lobbyists makes no sense.
• Decreeing any aid spending target is backwards. Development aid should be focused on outcomes, not inputs.

“Committing the UK to 0.7% will cost us an additional £2 billion every year – that’s equivalent to the salaries of almost 100,000 nurses or police constables. We need to move beyond the nonsensical 0.7% target and towards policies that actually work – focused on outcomes not inputs.” said Alec van Gelder of International Policy Network.

Ends.

*Michael A. Clemens and Todd J. Moss (April 2010). “Ghost of 0.7%: Origins and Relevance of the International Aid Target”, International Policy Network, London.

International Policy Network (www.policynetwork.net) is a global think-tank based in London, and is a charitable, non-partisan organisation. IPN runs campaigns seeking to educate the public about the importance of markets and market institutions in the context of global policies relating to development, trade, health, accountability and the environment.

For more information contact: Marc Sidwell, International Policy Network, (020) 3393 8410, (077)87348885, media |AT| policynetwork.net

Notes:

• Current spending on “aid” by the UK government is approximately 0.5% of GDP.

Statistical Release, Provisional UK Official Development Assistance as a proportion of Gross National Income, 2009, available at: http://www.dfid.gov.uk/Documents/publications/ODA%202009%20Statistical%2...

• Meeting the proposed target would involve an additional £2 billion in spending annually, at current figures.

IPN calculation based on Statistical Release, Provisional UK Official Development Assistance as a proportion of Gross National Income, 2009, available at: http://www.dfid.gov.uk/Documents/publications/ODA%202009%20Statistical%2...

• Labour, the Conservatives and the Liberal Democrats have all pledged to enshrine the 0.7% target in law, creating an obligation not only for the next Parliament, but for the foreseeable future.

Labour: http://www.labour.org.uk/policies/international-development

Conservatives, Manifesto p. 128: http://media.conservatives.s3.amazonaws.com/manifesto/cpmanifesto2010_lowres.pdf

Liberal Democrats: Manifesto pp. 62-63: http://network.libdems.org.uk/manifesto2010/libdem_2010_world.pdf