16.  Department for International Development (DfID)

The Government will help to alleviate poverty through: a new aid strategy targeted on the poorest people in the poorest countries and underpinned by an additional £1.6 billion over the next three years, which will increase the oda/GNP ratio to 0.30 per cent in 2001. These reforms will, by the end of the Parliament, improve the effectiveness of bilateral aid in addressing the international development strategy, and ensure that: at least 75 per cent of bilateral country programme resources are directed to low income countries by 2002; It will work with international partners to aim at a range of targets including: a 1.5 per cent increase in GDP/capita growth for the poorest 20 per cent of the population by 2002; a reduction of under 5 and maternal mortality rates to 70 per 1000 live births and 240 per 100,000 live births respectively by 2002; 91 per cent of children in primary school.

A new approach to investment in international development

16.1  The CSR will refocus UK aid policy to ensure it can make a more effective contribution to promoting economic development and fairness in the poorest countries and to provide new opportunities for poor people. It will also deliver the manifesto commitment to reverse the sharp decline in aid spending: over the last Parliament, aid spending fell by an average of 2 per cent a year in real terms.

16.2  It will build on the steps the Government has already taken to give international development higher priority. Immediately after coming to office, it established the Department for International Development (DFID), with its own minister in the Cabinet. And last November, it published a White Paper Eliminating World Poverty which set out the new strategy for more effectively targeting our development efforts.

Spending plans

16.3  DFID will receive an extra £1.59 billion over the 3 years of the CSR period, taking its budget to more than £3.2 billion in 2001-02 - a real terms increase of 28 per cent over the next three years. This includes extra provision over the two years 2000-02 to allow for the increased cost of aid to countries in Central and Eastern Europe in preparation for EU expansion. On current estimates, by 2001-02, the ratio of UK aid (calculated using the internationally accepted definition of "overseas development assistance" or "oda") to GNP is projected to have increased from 0.26 per cent in 1997 to 0.28 per cent in 1999 and 0.30 per cent in 2001.

16.4  DFID is the department responsible for the Commonwealth Development Corporation (CDC), a public corporation with investments of over £1.3 billion. Injecting private capital into the CDC, and allowing it to access private capital markets, will enhance its contribution to development. The Government has therefore decided to sell a majority share of the CDC as soon as possible - which should realise several hundred million pounds - and to recycle this money into aid spending. Some of these resources have already been included in the aid budget. The remainder will be added to the aid budget in the financial years from 2002-03.

Table 16.1: DFIDDepartmental Expenditure Limit

Investing in reform for international development

16.5  These additional resources will provide the resources for DFID to implement the reforms set out in the White Paper Eliminating World Poverty which will target development spending on the poorest people in the poorest countries. DFID will work to achieve this goal by establishing partnerships with the governments of poorer countries. Those governments who share the UK's commitment to eradicate poverty, and which are following sound economic policies will receive more assistance; those which do not will receive less. In countries where it is not possible to involve the host government in an effective partnership, but where the UK can have a positive impact, DFID will focus development assistance more narrowly on the transfer of skills and building local capacity through a range of development partners, including non-governmental organisations (NGOs).

16.6  DFID's increased budget and improved policy capacity will also enhance its influence with multinational bodies such as the World Bank and the UN development agencies, to which the UK makes a substantial contribution. It will use that influence to press those institutions, whose capacity to promote effective development is greater than that of any one country, to increase the international commitment to poverty eradication. This reflects the Government's desire to increase policy consistency to promote development, both internationally and domestically. Evidence of this commitment to poverty eradication is the discontinuation of the controversial - and inefficient - Aid for Trade provision which made some aid conditional upon the award of contracts of commercial and industrial benefit to the UK.

16.7  DFID's programme complements the other contributions the UK makes towards international development. For example, UK private flows to developing countries are among the highest in the OECD, reaching about 1.5 per cent of GNP last year. These flows play a significant role in promoting economic development in some of the poorest regions of the world. DFID will establish new partnerships with British business to support our development goals.

16.8  The UK has consistently provided an international lead on debt relief for the poorest countries, building on the Heavily Indebted Poor Countries (HIPC) initiative and the Chancellor's "Mauritius Mandate". The UK is also working to encourage and assist developing countries to become more fully integrated into the multilateral trading system and to participate in the World Trade Organisation. The UK will play a full part as major shareholders in the IMF and World Bank, helping them to maintain macroeconomic stability and sustainable growth from which the poor will benefit.

16.9  Moreover, in the March 1998 Budget the Chancellor introduced the Millennium Gift Aid initiative, a unique measure specifically designed to help the world's poorest people. This tax relief on charitable donations above £100 will encourage donations to UK charities engaged in poverty relief and education projects in the world's poorest countries.