EU aid update

Friday, July 1, 2011 - 10:36

Unable to reach a deal at last month’s summit in Brussels, EU member states are continuing to haggle over the details of the next EU budget.

Last week, the European Commission released its budget blueprint for 2014-2020.

The proposal included a planned increase in development spending from €56 billion to €70 billion – something which we welcome.

There was also a proposal for an EU-wide Financial Transaction Tax and a commitment to climate action as a core policy - all positive developments.

But the proposals also give us real cause for concern, revealing the EC’s plans to stop funding for emerging economies – where three quarters of the world’s poor live – and to use EU external policies to deliver more opportunities for EU businesses. 

These are alarming developments which, if approved, will mean that poverty eradication and fighting injustice are no longer central to EU development policy.

But the budget is only one part of a wider debate about how the EU delivers on development policy.

Value for money has become the phrase of choice for EU decision-makers, and rightly so. But are they going about it in the right way?

Some Member States have, in recent weeks, signaled a move away from budget support, reconsidering their positions because of questions surrounding its impact, quality and value for money.

Changes are also afoot in EU policy, with the European Commission recently completing a consultation, to be followed by a communication later this year. This will set the tone for EU policy for the years ahead.

The European Parliament has also joined the debate, releasing a report reaffirming the importance of budget support for third countries. But the debate still remains open, and a controversial one.

Yet despite all the controversy it attracts, budget support does get results. And this shouldn’t be forgotten.

It is effective because if delivered well, it can respond directly to the finance needs of recipient countries, using their own systems and development indicators.

But for this to happen, it’s vital that European donors, recipient governments and civil society in developing countries, agree to a limited set of pro-poor benchmarks, which should be drawn from poverty targets agreed by recipient countries.

European donors shouldn’t impose harmful economic conditions on their budget support as these can do more harm than good, and have consistently failed to deliver results for people living in poverty.

When determining criteria for assessing which countries are eligible for budget support, European donors should use a dynamic approach and avoid having a minimum threshold or set of standards.

This is not to say we should just throw money at the problem without any accountability. But it’s time to acknowledge that development is most effective when citizens have a say over how it works and when their governments safeguard and deliver rights.

Aid for national development is most effective when agreements are transparent and multi-stakeholder, and when it includes support to accountability institutions and increased transparency in public finance management.

Sure, there have been cases of corruption, and these should be taken very seriously.

But it’s wrong to assume that budget support is any more prone to corruption than other aid modalities. It’s not.

In fact, budget support can help strengthen government institutions and build the domestic accountability and transparency that reduces corruption.

Examples of budget support strengthening domestic accountability through annual public reviews, parliamentary oversight and budget tracking already exist.

But what is important is that we build on this trend, by including civil society and national parliaments in all steps of budget support programme design, policy dialogue and assessment, and by mainstreaming gender sensitive budgeting and impact assessments to ensure accountability towards donors and citizens.

If done correctly, budget support can play a vital part in ending aid dependency. EU member states should look at how they can improve results rather than abandoning it all together.