MPs raise concerns over UK aid funding Chinese film industry

Aid delivered under multi-million-pound cross-government fund is insufficiently focused on poverty reduction and lacks transparency, MPs said.

The emphasis of the prosperity fund on promoting British trade was a “step towards” tied aid, a concept discredited after Britain’s “aid for arms” scandal 25 years ago, according to a report on aid spending across Whitehall by the international development committee (IDC). The Pergau Dam affair, in which hundreds of millions of pounds in UK aid were linked to a major arms deal, was uncovered by a National Audit Office report in 1993.

Projects supported by the prosperity fund – which is administered by the Foreign Office and paid out £46m in 2017 – included development of the Chinese film industry, improving the Chinese museum infrastructure and improving the credit bond rating system in China, MPs found.

“It is unclear to us how these types of interventions will benefit the world’s poorest people; both those living in the countryside and the urban poor,” they said.

The report, which also raised concerns over transparency of aid spending outside the Department for International Development, called for the department, given its expertise, to sign off all overseas aid.

Last month, the committee urged Penny Mordaunt to “get a real grip” on aid spending by departments other than DfID, after it emerged aid money spent via the prosperity fund had “very tenuous links” to poverty reduction.

Romilly Greenhill, UK director of the One campaign, welcomed the IDC’s findings.

“The IDC is right to call out aid that doesn’t meet its core purpose of fighting poverty,” she said. “Their recommendation that DfID – with its world-leading expertise in using aid effectively – be given final sign-off of UK aid spent anywhere in Whitehall is spot on.”

Greenhill also welcomed the IDC’s recommendation that the government should make systematic improvements to coherence, transparency and the poverty focus of cross-government funds before increasing their share of overseas aid cash.

The prosperity fund and the conflict, security and stability fund (CSSF), both cross-government aid pots, spent a total of £603m overseas aid in 2016-17.

The report said that cross-government projects should focus on the world’s poor. It said: “The increasingly prominent role played by the cross-government funds raises particular concern given their shortcomings in focus upon poverty reduction and transparency. We found, in practice, many prosperity fund projects showed very weak targeting at their primary objective, with negligible targeting towards helping the poorest and most vulnerable.”

In written evidence to the committee, Oxfam said that 20% of the prosperity fund’s projects in China involved explicitly promoting the capabilities of UK entities alone, and that half of all projects in China involved showcasing UK companies and promoting UK-China collaborations.

MPs said this raised “concerns about the potential to lead to tied aid, with the recipient of aid dependent upon granting the UK trade partnerships”.

Stephen Twigg, the IDC chair, said “serious questions” needed to be asked of the prosperity fund.

“There’s a serious risk that we could go backwards,” he said. “We’ve seen this drive to increasing the amount of spend in departments other than DfID. We have had an effective doubling of the proportion of ODA spent in departments other than DfiD.

“We’re not saying it’s wrong [that] that money is spent in other departments, but that DfID need to oversee all of it.”

In 2017, DfID accounted for 72% of ODA spend, compared to 88% five years ago.

MPs also expressed concern over the transparency of the CSSF. They received “contradictory reports” in evidence of the CSSF’s approach to redacting information, with suggestions that information was routinely redacted.

“This lack of clarity risks undermining faith in the UK aid brand,” the report said.

The committee said overseas development assistance should not be used as a “slush fund” to pay for the UK’s diplomatic, trade or national security interests, but should be used to reduce poverty, to help the world’s poorest and most vulnerable people.

The MPs called for a review of all existing programmes under the prosperity fund and said that the CSSF should also be reviewed in its current form. They also called for the aid watchdog, the Independent Commission for Aid Impact, to scrutinise cross-government funds.