Aid under pressure report

• Report: Aid Under Pressure: Support for Development Assistance in a Global Economic Downturn
• International Development Committee

An additional 90 million people are expected to be living in poverty by the end of 2010, and 400,000 more children are likely to die as a result of the financial crisis. Progress towards the Millennium Development Goal of eradicating hunger and extreme poverty has been set back three years.

The Chairman of the Committee, Rt Hon Malcolm Bruce, said:

"Developed countries have a moral obligation to support poor countries through this crisis. The recession should not be used as an excuse to reduce aid flows. The UK Government has made clear that it will meet its existing aid commitments. However, several countries who made similar promises are cutting their aid budgets. This is unacceptable. The UK must use its position as a global leader in development to press other governments to honour the funding pledges they have made, including at the G8 summit in July."

The Committee welcomes the agreement reached at the G20 London summit to provide billions of dollars of additional resources for the international financial institutions. The majority is going to the International Monetary Fund (IMF) and will provide a much needed boost for balance of payments support. However, it remains unclear how much of the funding will benefit developing countries.

Malcolm Bruce said:

"The IMF must justify the huge uplift it has received in its resources by responding much more flexibly and speedily to developing country needs. It is also essential that increased resources are accompanied by long-awaited governance reforms of the international financial institutions. Developing countries must be given a stronger voice on boards and in decision-making processes, particularly those of the World Bank. This is not just a question of fairness, it will also improve the quality of the decisions these bodies make, and enable them to respond more effectively to the crisis."

The Committee also highlights the importance of assisting poor countries to gain the maximum benefit from their own resources. They currently lose billions of dollars each year to tax evasion by international companies. The G20 sent out a strong message on enforcement of international tax standards. The challenge now is to ensure that measures are implemented.

Malcolm Bruce said:

"Tax havens cost poor countries billions of pounds in lost revenue. British Overseas Territories which are tax havens have dragged their feet for years despite signing up to international standards. The UK Government has a responsibility to make amends for past failure to act by taking steps, as a matter of urgency, to ensure that Overseas Territories cease to be tax havens."

The Committee also examined the emerging signs that the downturn is beginning to undermine previously strong UK public support for aid. It argues that concerns about high levels of corruption and waste in the use of development expenditure need to be allayed, and that DFID must do more to show the public the many and varied positive outcomes of its work in poor countries.

Malcolm Bruce said:

"The visibility of UK aid expenditure needs to be increased at home and abroad. The Government must do more to demonstrate to the British public that its aid spending is having a positive and tangible impact in poor countries. DFID should consider changing its name to one which more accurately reflects the important work it does, such as "UK DFID" or "British Aid". This change would also help recipients of UK aid to understand that it is being provided by British taxpayers."