Can the UK contribute to EU aid funds after Brexit?

LONDON — The United Kingdom currently spends about £1.5 billion ($1.93 billion) of official development assistance — or 11 percent of its aid budget — through the European Union annually, contributing to EU aid projects on everything from economic to social development. At various points throughout the Brexit negotiations, the government has appeared to support continued collaboration on EU aid work after it exits the bloc in March 2019. But with little new detail included in the draft Brexit agreement released Wednesday, it remains unclear if or how it could do that.

Approximately two-thirds of the U.K.’s contribution to EU aid in 2016 went through the official EU budget, which is agreed on a long-term basis every seven years. One-third went through the European Development Fund — dedicated to development cooperation with countries in Africa, the Caribbean, and the Pacific — which currently sits outside the EU’s official budget.

Donors contribute on a voluntary basis, and the U.K. has agreed to keep funding EDF with observer status until 2020, when its current funding cycle runs out. These and other rolling commitments mean the U.K. will pay between £3 billion-£4 billion of ODA into EU coffers until 2026, Secretary of State for Development Penny Mordaunt said in July.

With that money already accounted for, the big question is what happens post-2020.

The U.K. Department for International Development has said it is open to continued collaboration with the EU, but with caveats. “If we choose to fund EU development programs in future, it will be because we think that working with the EU is the best way to achieve a particular U.K. priority,” Mordaunt told a parliamentary hearing in July. But “any U.K. financial contribution would need to be underpinned by a shared framework that enables U.K. influence and oversight over U.K. funds … In addition, U.K. organizations must be eligible to implement any programs we choose to fund,” she added.

In various papers published during the year, DFID specifically identified peace and security, migration, and humanitarian aid as possible areas for collaboration and suggested the EU design flexible aid instruments post-2020 which are open to participation from nonmember states.

But that hope may be scuppered by separate plans from the EU for a major overhaul of its aid budget, which is aimed at increasing transparency but will likely make such collaboration more difficult. The reform plan would draw most of the EU’s existing aid instruments, including EDF, into a single “Neighborhood, Development and International Cooperation Instrument” inside the official EU budget. Crucially, NDICI is unlikely to be open to nonmember states.

As a result, the U.K. is rapidly running out of options, according to Mikaela Gavas, visiting fellow at the Center for Global Development Europe. “DFID is keen to engage with the EU in some way … but the problem they have is that it’s going to be more and more out of their control [and] the windows are closing quite rapidly in terms of the channels they could use to spend the money,” Gavas explained.

There are other possible channels the U.K. could look to, Gavas added. These include the EU Trust Funds, over which contributing third countries have some management and strategic oversight, and the External Assigned Revenue Facility, which is open to members of the European Free Trade Association including Norway and Switzerland. In 2016, EFTA countries contributed about €400 million ($452.8 million) to the EU budget, though generally not for ODA.

“Delegated cooperation” could offer another option — a mechanism where the EU entrusts funds to a member state or third-party donor that is in a better position to lead on a project. Gavas also mentioned the External Action Guarantee, which has been proposed under the new Multiannual Financial Framework, and which would accept contributions from nonmember states but without giving them a seat at the table.

However, these options are relatively small-scale and project-based — and are unlikely to prove a viable alternative for the UK’s £1.5 billion ODA spend, Gavas explained.

Emmanuel de Groof from the European Center for Development Policy Management, a Netherlands-based think tank, said that since negotiations for NDICI are still ongoing, a role for the U.K. could be found.

The country could use “creative thinking and lawyering” to negotiate an “ad hoc voice without vote,” he suggested. Through its continued participation as an observer in EDF until 2020, it could also create a “constructive atmosphere” of collaboration that could ultimately translate into a new kind of development relationship. For example, the U.K. and the EU could jointly fund “one concrete flagship project,” which could be agreed even before NDICI negotiations are completed.

De Groof also emphasized that regardless of what agreement, if any, is ultimately struck in terms of funding, the U.K. and EU missions are likely to keep collaborating on the ground given U.K. expertise in certain sectors. This is already the case with other third-party countries, notably Switzerland, he said.

But having an influence over EU development will take more than financial contributions, according to Gavas, who said the U.K. will need to put more time and resources into staffing in Brussels and London, and that British politicians will need to spend more time talking to their European counterparts.

“If the U.K. wants to continue to have an influence over EU development policy, the U.K. is going to have to really step up its engagement. This is going to require DFID to have a mandate to invest its resources, time, and thinking to influence EU policymaking on development,” she said.

Over the coming weeks, as Britain hurtles toward its exit from the European Union in March 2019, Devex will be exploring the impact of Brexit on aid. Keep an eye out for more stories to come, and comment below about topics you’d like to see covered.