EU gives more cash to development but will it tackle poverty?

On 7th of December the European Commission presented its proposal on how it will spend €62 billion on aid between 2014 and 2020.

This represents a slight increase in the EU’s development budget and is potentially very good news for the fight against poverty globally.

It will split the money into a number of instruments – one of these is the Development Cooperation Instrument - which will also see a significant increase over this period.

The increase in money for development is very positive. But the real test will be how the cash is spent.

For example, the new EU development policy roadmap presented by Development Commissioner Andris Piebalgs back in October, contained a clear commitment to prioritise agriculture. But how this will happen and how the money is allocated is still up for decision.

It’s especially difficult to see how the EU will make sure the money reaches those who need it most – smallholder farmers, most of whom are women, who have the potential to develop themselves out of poverty, have been massively neglected in recent decades.

The European Commission continues to stress its focus on economic growth as the primary means of eradicating poverty. But this approach has been tried in the past and has not worked because of huge inequalities within developing countries. 

Inequality has been a huge factor preventing efforts to reduce poverty in countries where growth levels have boomed in recent years. Whilst there are some proposals to tackle inequality in the new development policy, we are yet to see the approach reflected in the budget proposals.

ActionAid is calling on the European Commission to keep poverty reduction at the centre of its external policies.

It is unclear how the use of aid as a catalyst for growth, involving the increased channelling of public money through the private sector, will ensure a much needed poverty focus is retained in EU development policy.  

Companies are ultimately motivated by profit, not development outcomes.

This may not produce outcomes that help the world’s poor.

At a time of financial crisis, governments are seeking solutions and are tempted to channel aid through the private sector. But it’s been tried before and didn’t work.  

A much more poverty-focused solution would be to use tax as a catalyst – to support countries’ own efforts to build up their self-sufficiency through tax bases.  

One of the biggest and most controversial changes will be the reallocation of bilateral development aid away from higher middle income countries.

The Commission is proposing to make its future allocation decisions on the basis of purely economic criteria such as the Gross National Income per habitant, and not on a poverty analysis of each country.

Despite having high levels of economic growth, Middle Income Countries also often have high levels of inequality, which hide the reality of poverty within their own borders. Aid should go to the poorest people, who don’t necessarily live in the poorest countries according to national averages.

Regardless of what decisions are made, aid should not be switched off over night. 

The EU should work with countries and civil society within those countries on how to phase out aid without harming ongoing efforts to stamp out poverty.

The European Commission has now proposed a list of 19 countries that will lose their bilateral aid. This will be subject to a great deal of discussion over the coming months.

ActionAid stresses the importance of keeping this list transparent and to ensure the European Parliament gets a say on which countries are on it.