Department for International Development Annual Report and Resource Accounts 2010-11 and Business Plan 2011-15

1. WWF-UK welcomes DFID’s prioritisation of climate change in their 2011–15 Business Plan, however, we are concerned by the absence of wider environmental issues in particular the management of natural resources. DFID needs to recognise that the environment underpins all six of the objectives set out in its Business Plan and identify how it is going to manage potential tensions and trade offs between its different priorities.

In 2010 the Coalition Government decided to follow the previous government’s policy of progressively increasing year by year the proportion of Gross National Income allocated to Official Development Assistance (ODA) in order to reach the UN target of 0.7% by 2013.

However, following lower estimates of economic growth in the Autumn Statement 2011, the Chancellor of the Exchequer, while deciding to retain the 0.7% target, announced a reduction in the Department’s planned budget of £380 million in 2012–13 and £790 million over the following two years. This will affect the attainment of the Millennium Development Goals by 2015, though this problem would be avoided if other major donors fulfilled their commitments. We welcome the decision to retain the 0.7% target, but note that there will be difficulties in meeting the target, given that ODA includes a number of potentially large items beyond DFID’s control, in particular gift aid and CDC sales and receipts. The Department has not yet worked out the precise consequences of the reduction in its planned budget for its programmes, but the major change is likely to be a reduction in its uncommitted funds—so its current bilateral and multilateral programmes are unlikely to be significantly affected.

Under the Comprehensive Spending Review in 2010 DFID expenditure was to increase by £2.5 billion between 2012–13 and 2013–14 (from £8.8 billion to £11.3 billion). We have expressed the view in previous reports that it would be hard to spend the enormous increase in expenditure between 2012–13 and 2013-14 (£2.5 billion) efficiently in poor countries with limited administrative capacity. The decision to cut spending by over £100 million more in 2012–13 than 2013–14 makes the increase between these years even larger and hence exacerbates the challenge. While the cut in spending will not affect programmes already planned because of the extent of uncommitted funds retained by DFID, DFID does require clarity about its future budget. In its response to this Report, the Government should set out how it plans to set a stable budget for DFID consistent with meeting the 0.7% target.

In 2010 the Government also announced that DFID’s administration costs (essentially back office functions) were to be cut and its operating costs (including frontline staff in-country as well as back office functions) were to be restricted and would fall to 2% by 2014–15. We note that DFID is cutting its administration costs in line with plans. We repeat the warning we made last year that efficiency must not be compromised by an attempt to reduce costs whatever the consequences. We welcome the Permanent Secretary’s assurance that operating spending would rise above the 2% ceiling if necessary.

We do not consider it cost effective for DFID to contract to outside agencies simply to achieve its own target operating costs. By definition it is cheaper to distribute funds to outside organisations than to manage projects internally. The Department should assess the best and most effective way to deliver development assistance as it may be able to do it more cheaply and effectively than an external organisation. We are concerned that restrictions on staff levels and operating costs may force the department to spend its budget less effectively.