DfID could raise more private cash as minister says 0.7% aid target 'unsustainable'
Proposed funding shift will look to unlock philanthropists, investors and the general public to provide more private donations
The Department for International Development should focus more on drumming up private charity donations than spending taxpayers' money, Penny Mordaunt has told the cabinet.
Both The Sun and The Times report that the international development secretary told colleagues that the government's pledge to spend 0.7% of the UK's economic output on overseas aid was "unsustainable".
Mordaunt said that the department should "move from being a spending department to a fundraising department".
Britain's aid budget currently stands at £13.9bn – but Mordaunt is said to have told fellow ministers that she planned to try and draft in philanthropists, big banks and the general public to provide more in private donations.
The international development secretary has previously proposed a string of changes to the way DfID uses aid money, including allowing profits made by the department’s private sector investment arm CDC to be funnelled towards meeting the UK’s commitment to spend 0.7% of economic output on aid.
Mordaunt has also called for a national conversation on whether personal savings and pension investments could also be used.
Rules governing what funds count towards the 0.7% target, and what the money can be spent on, are set by the Organisation for Economic Co-operation and Development's Development Assistance Committee (DAC).
Currently, this is limited to government funds and does not include profits from such overseas investments, but Mordaunt said in October that she was looking to work with the international body to see how the use of money from private investments could be increased.
“Investing in developing countries in Africa and Asia helps to build the markets of the future and for UK businesses as we look to forge new trading partnerships. This is sustainable development,” she said.
“The more we do, the more we can trade, the more we can trade the less demand there will be for aid.
“And in future years as the amount of funding coming back into our own development financial instruments increases we should be open to using these profits to count towards the 0.7% and I’m exploring the scope to reinvest those funds with the DAC to maximise the value of our investments.”
The department’s permanent secretary Matthew Rycroft has also stressed the importance of promoting private sector development as part of DfID’s mission, alongside the 0.7% spending plan, in an interview with Civil Service World.
“The heart I think of effective sustainable development is working with people, working with the grain of the country,” he said. “But you’ve got to find the people in the system who are trying to do the right thing and then empower them and encourage them and then use our aid budget to catalyse other people to come in," he said.
"Even as a very generous 0.7% donor, we as the UK are never going to solve the world’s problems on our own, but we can have a transformative effect of leading collections of other donors, of international organisations like the UN and the World Bank and critically, of the private sector. Because there is way more capital in the private sector than in even a very generous aid budget, way more, so trying to find a way, as we do, of encouraging the private sector to invest in these sorts of countries, and building jobs and growth to eradicate poverty, in the long term that is going to be good for those countries, and good for the UK.”
Former foreign secretary Boris Johnson told the Financial Times earlier this month that he believed DfID should be folded back into the Foreign Office, from which it was spun out in 1997, arguing that Britain “can’t keep spending huge sums of British taxpayers’ money as though we were some independent Scandinavian NGO”.
But a source told The Times: “British aid helps millions and is a powerful statement of global Britain’s place in the world. It protects our interests: by building a safer, healthier, more prosperous world, we can protect our own people from disease, conflict and instability.
"This is the right ambition for a country with a global outlook, so we will maintain the commitment to spend 0.7% of our gross national income on assistance to developing nations and international emergencies."
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