DevExplains: What are the DAC rules, and why do they matter?

LONDON — Concerns have been mounting in U.K. civil society about the government’s commitment to the international aid spending rules following the opening of its new Foreign, Commonwealth & Development Office.

In recent years, the U.K. government has expressed displeasure with the guidelines by the Organisation for Economic Co-operation and Development's Development Assistance Committee that govern official development assistance — even though the U.K. played a big part in writing them.

While the government has publicly committed to spending 0.7% of gross national income on aid — a Conservative Party manifesto promise — ministers have been less forthcoming about the DAC rules, despite direct questions in Parliament. Development insiders worry there is less public awareness and admiration for DAC membership than the 0.7% target — which is enshrined in law — meaning it could be easier for the government to bypass.

While experts say it is common for the DAC rules to be bent as far as possible, even by respected donors, there are fears that U.K. development policy under the new department could lead to a substantial break with the rules. And with no consequences written into law, it would be easy for the U.K. government to do so, according to experts.

Devex looks at what a break with DAC would mean for U.K. aid and other donors.

What is DAC?

The Development Assistance Committee is a group within OECD made up of 30 of the world’s biggest donors, including the U.S., U.K., Germany, France, the European Union, Australia, and Japan.

The website describes its current goal as promoting “development co-operation and other relevant policies so as to contribute to implementation of the 2030 Agenda for Sustainable Development ... and to a future in which no country will depend on aid.”

The U.K. in 1960 was a founding member of DAC’s predecessor, the Development Assistance Group, and the first reviews of foreign aid donors took place in 1962 as it worked to improve the tracking and standardization of aid flows. Since then, the organization has produced guidelines for quality aid spending. Any changes to the rules must be achieved by consensus.

What are the rules?

While the rules are technically complex, they fundamentally “define what we consider to be good foreign aid,” said Amy Dodd, head of engagement at Development Initiatives. Their importance is due to the impact they help achieve. “The rules are also a reflection of a lot of lesson learning; we’ve figured out what works best,” Dodd said.

DAC refers to its own rules as the “gold standard” of aid spending, under which “government aid ... promotes and specifically targets the economic development and welfare of developing countries.”

Experts point out that this definition is extremely broad and leaves donors with a lot of room for maneuver. The DAC rules do ban spending ODA on military aid and for security reasons — though there is an allowance of 15% of the budget for peacekeeping — as well as for commercial objectives. Even then, though, aid approved by DAC has found its way to security forces across the world.

DAC also defines the countries eligible to receive ODA based on per capita income — only low- and middle-income countries can receive DAC aid — and this is evaluated every three years. That has contributed to some of the tensions with the U.K. government, which wanted to use ODA to provide hurricane relief for its overseas territories that were deemed too rich.

DAC tracks and analyzes its members’ contributions to ODA each year. Together, DAC member countries spent $152.8 billion on ODA within the rules in 2019.

Why might the UK break with the rules?

Under domestic law, the U.K. is committed to spending 0.7% of gross national income on ODA. At the moment, it spends that within the rules set by DAC. But ignoring them would allow the U.K. government to put that money — billions of pounds per year — toward objectives that fall outside the DAC boundaries.

In the past, it has threatened to break with the rules over which countries it can provide ODA to, the limits on security-related spending, and a plan to recycle profits made by its development finance institution to top up the aid budget. So far, it has not followed through.

But the issue has reared its head again after the Department for International Development, which was widely regarded as protecting the integrity of U.K. aid spending, was merged with the Foreign & Commonwealth Office.

Recent media reports have floated the prospect of diverting the aid budget to the intelligence services, for example. Coupled with a lack of reassurance from ministers, these reports have caused concern about the government’s future relationship with the multilateral body. There are also concerns that the government would try to use the aid budget to support trade as it pursues its post-Brexit “Global Britain” agenda.

How easy would it be to break the rules?

While the U.K. government’s International Development (Official Development Assistance Target) Act 2015 refers to spending 0.7% of GNI on “official development assistance,” it does not refer to the DAC rules, and it is a “domestic decision” as to what constitutes ODA, according to Ambreena Manji, professor of land law and development at Cardiff University.

“The DAC rules simply overlay the current legal framework in the U.K. The U.K. has not bound itself by its own domestic law to obey the DAC rules, and if it wished to, it could revert to its own definition [for aid spending],” she said.

“There is no legally binding instrument that stops the U.K. from spending aid in the way that the U.K. defines it,” agreed Celine Tan, co-director of the Centre for Law, Regulation and Governance of the Global Economy at the University of Warwick’s School of Law.

“There is no statutory definition of what aid is or ODA is,” Tan said. As a result, “there will be no legal impediment to … FCDO spending aid in a way that is inconsistent with DAC rules.”

Why would it matter?

The main consequence for the U.K. in breaking with the rules would be reputational, experts told Devex. A DAC peer review of U.K. development cooperation to be published in the autumn is one way other member states could express disapproval of the U.K. government.

The U.K. is one of a handful of countries to meet the ODA spending target, and “we know this is a real contributor to soft power and our global reputation,” said Romilly Greenhill, U.K. director of the ONE Campaign. “But the only way it’s going to continue being a contributor is if we’re also shown to uphold the spirit, as well as the letter, of the aid rules.”

There is also a “real risk” that spending the 0.7% aid budget without following DAC rules means that it “won’t actually be very good aid,” Dodd said. “It's perfectly right the U.K. spends money on its defense and diplomacy and intelligence services and all of those things — you just can’t necessarily conflate those with development.”

In addition, if the U.K. chose to undermine international aid spending rules, other donors may follow. The rules are “something that we’ve made a big effort to contribute to and something that has brought us kudos internationally, [and] it will really undermine that,” Greenhill added.

Such a move “would really damage the reputation of our country [the U.K.] ... as a force for good in the world and would probably damage relations with many of our international partners.”

Dodd warned that any attempt to ignore the DAC rules would have “some of the same tone” as when the U.S. decided to leave the World Health Organization.