Harry Fairhead: Taxpayers pay price for absurd overseas aid formula

Rotherham-born International Development Secretary Justine Greening (right), during a tour of the Bourj Hammoud School, a mixed school teaching Lebanese and Syrian children in Beirut, Lebanon, to see how the UK's response and aid is helping the refugee crisis.

This is the ludicrous way Government spending decisions get made now we have this arbitrary target (absurdly enshrined in law) to spend 0.7 per cent of Gross National Income (GNI) on Official Development Assistance (ODA).

This defines our aid programme in terms of financial inputs – whether enough taxpayers’ money has been spent to hit the target – rather than by outcomes and whether it has actually done any good. If – hypothetically – our national income doubled overnight, we would also therefore have to double our international aid budget. This situation is clearly unlikely to occur, but it does highlight how preposterous it is to set an arbitrary target for aid spending.

Similarly, the fact that politicians are insisting they must spend 0.7 per cent of national income on aid in perpetuity seems to imply that they don’t expect to ever reach the point where we don’t have to provide help to developing countries.

In order to hit the 0.7 per cent target, a whopping £11.8bn was spent on aid in 2014. For context, this is roughly the same amount raised in revenue from Stamp Duty on homes or more than Capital Gains Tax and Inheritance Tax receipts combined. These are very economically damaging taxes, restricting the sale of homes and gumming up the housing market or disincentivising people from growing their businesses, respectively. The Chancellor could cut the aid budget and cut these taxes, or put this money towards reducing the £72bn deficit we have this year.

There are so many examples of the aid budget being spent in deeply questionable ways. Just last week we have been told of aid funding singing lessons, media training and £5m for a think-tank in the not-so-cash-poor United States. Our own research has found more of the same in recent years. The European Development Fund (to which UK taxpayers contribute substantially) paid for community art spaces, the development of musicians and a programme simply entitled “Contemporary Dance for empowerment and social change” (whatever that may entail) in Tanzania.

While some of these programmes may be worthwhile, they should be funded through voluntary donations. And don‘t forget that the 0.7 per cent target does not include a penny of the considerable amounts that Britons already give privately to organisations working in the Third World. This sends a dangerous message that the Government only values money which Ministers have sent overseas themselves, completely disregarding all private philanthropy.

There is an argument that the provision of goods and services to developing countries can, in the long term, be harmful. Providing capital to build a new airport, for example, means that the recipient government does not need to finance the project itself. In turn, there is then no need to impose taxes to raise the cash, so there is little incentive for that government to act legitimately and non-corruptly to ensure revenues.

The mantra of “trade not aid” remains true. As free trade has spread across, the world the number of people living in extreme poverty has plummeted, despite the global population soaring. According to the Human Progress website, in 1970 there were 2.2 billion people in extreme poverty and 1.4 billion who were not; in 2011 1.1 billion were and almost six billion were not. So to help those in the developing world we should reduce tariffs and artificial barriers to open the markets – and it is a bonus that this does not come with a hefty price tag for UK taxpayers.

No one l know begrudges emergency taxpayer support after a natural disaster, for example, but billions spent on dubious development projects are another matter.

So we should support the online petition calling for an end to the 0.7 per cent target.

Aid programmes should be looked at on a case-by-case basis and the amount of taxpayers’ money allocated should not be based on whatever the current growth forecasts look like. The Yorkshire Post readers, and the wider British public, are incredibly generous in supporting good causes, but they can only do so if the Government leaves the money in their pockets in the first place.

Harry Fairhead is policy analyst at the TaxPayers’ Alliance.