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Oxfam accuses UK of cutting aid

01.01.70

Charity says debt relief to Iraq and Nigeria hid drop
Government denies claim and forces change to study

Larry Elliott, economics editor
Friday June 9, 2006
The Guardian


The government and Oxfam were locked in a furious political row last night after the development charity issued a report showing that Britain's 2005 campaign for Africa coincided with a 2% cut in the aid budget after one-off debt relief to Iraq and Nigeria was taken into account.
Downing Street, the Treasury and the Department for International Development (DfID) all dismissed the study, which used international data from the Paris-based Organisation for Economic Cooperation and Development. Whitehall insisted that Britain was massively increasing its help for poor countries.

Hilary Benn, the international development secretary, said: "The government has set a clear timetable to meet the [UN] 0.7% target for development assistance as a share of national income by 2013 and is fully on track with its plans to achieve this."
After lobbying from Whitehall, Oxfam agreed to make changes to its report on the progress made by the G8 nations in the year since they agreed at the Gleneagles summit to double aid by 2010. The non-governmental organisation (NGO) had been planning to name and shame Britain, France and Germany by saying in the report that aid had "actually decreased" in 2005 but left this out of the final text.

But Oxfam denied it had bowed to political pressure from the government. "Oxfam is seriously concerned that the underlying trend in real aid across the G8 is not enough to meet the promises made at Gleneagles," said Phil Bloomer, Oxfam's campaign and policy director.

"Far too much of the increase over the last year in aid has been the result of debt relief for Nigeria and Iraq. That creates a cliff for G8 countries to climb in terms of doubling aid by 2010."

Amended

In the Oxfam report, a table comparing the aid record of the G8 countries bar Russia was amended to include a footnote saying that the 2% fall in British aid after debt relief had been affected by loans and repayments to the Commonwealth Development Corporation (CDC) a government- owned body that lends money to poor countries. "When this is taken into account, UK ODA overall rose by 7% in 2005," the footnote said.

Oxfam has traditionally been the NGO with the closest ties to the government, and Whitehall moved speedily yesterday to defuse the impact of the report. The prime minister made aid to Africa the centrepiece of the UK's presidencies of the G8 and the EU in 2005, and urged other rich countries to commit themselves to a doubling of aid by 2010.

In its amended report, Oxfam said the G8 had to make good on its promises. "On the face of it, OECD figures show that 2005 aid from the G8 has increased massively, by $21bn, or 37%, over its 2004 levels. However, this increase does not withstand closer scrutiny, since the overwhelming majority of the increase (80%) is made up of one-off debt cancellation deals for Iraq and Nigeria and is not actually new money in the fight against poverty. Together, these two deals add up to $17bn of the $21bn increase. Discounting these figures, the underlying trend in aid by some of the richest countries in the G8 actually gives cause for serious concern."

Oxfam said the G8 aid figures would again be flattered in 2006 by the second tranche of debt relief for Iraq and Nigeria but warned that the true picture would emerge in 2007. "The G8 must show us now how they intend to defuse their 2007 time bomb. They should do so by separating out debt cancellation from aid (as Norway does), or at a minimum by spreading its impact on aid figures over a much longer period.

"Overall, the G8 members are much less generous than many other rich countries; they give an average of $90 per person per year, compared to $300 in the Netherlands. They can and should give far more."

Mr Benn said the 2004 spending review had increased the DfID's budget from 3.8bn in 2004-05 to 5.3bn in 2007-08 - an average annual rise of 9.2% and an increase in real terms of 140% since Labour came to power in 1997. Treasury sources said the budget for the DfID had increased by 600m between the financial year 2004-05 and 2005-06. It said the discrepancy with the OECD figures was due to comparing calendar years with financial years, and fluctuations in the finances of the CDC.

Britain makes annual payments to the World Bank, with the 2004-05 tranche delivered in late 2004 and the 2005-06 tranche paid in early 2006. The lack of any payment in 2005 had the effect of trimming the government's aid budget in the calendar year 2005 by 250m.

In addition, the Treasury said, the CDC lent 210m more in 2004 than it received in repayments, thereby boosting aid flows. In 2005, the picture was reversed, with loan receipts and equity sales 200m higher than new loans. The 410m swing in the CDC's finances brought about the 2% fall in aid noted in the OECD's figures.

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