Draft Brexit agreement plots future for UK aid — up to a point

A lone U.K. flag in a group of European Union flags. Photo by: sgoldswo / CC BY-NC-ND

LONDON — The European Commission has released the first draft of the legal document that will eventually guide the United Kingdom out of the European Union and in the meantime, sets out some ground rules for the U.K.’s engagement during the transition period ending Dec. 2020, namely in the European Development Fund and some migration-related funds, such as the EU Facility for Refugees in Turkey.

While the document is not legally binding, the draft begins the months-long process of revisions and negotiations that will, by May, produce the blueprint for Brexit.

When it comes to aid, perhaps fortunately for the U.K.’s Department for International Development, the document closely mirrors DIFD’s unofficial agreements with the EU so far, translating the joint report published in December into legal jargon. Still, the insights from the joint report and now the new draft bill only go up to a point: Specifically up to Dec. 2020. In short, it provides a reassuring look at how aid will function through that Brexit transition period, but not much further.

A step toward the long haul

Even with this document, little is known about how the U.K. will spend aid through EU instruments after the Brexit process is officially completed, in March 2019.

The draft agreement contains only a few provisions related to international development. Notably in Article 124, the document sets out quite rigid rules for the U.K. during the transition period, namely that the U.K. cannot provide leadership, or host the headquarters of any EU operations.

Elsewhere, the EU mirrors the joint document, offering access “as a third country” during the transition period to the Facility for Refugees in Turkey and hints at a possible door into the European Development Fund.

“While it might be inevitable that the European Commission focuses in the Withdrawal Agreement on settling ‘current’ issues, there are major areas where clearly regulations are proposed beyond the transition period,” Johannes Trimmel, president of the board of CONCORD, a European confederation of NGOs working on relief and development, told Devex.

“It is irritating that in the area of development cooperation and international cooperation, no provisions beyond the transition period are included, especially as currently the negotiations on external financing instruments for beyond 2020, including a next phase of the European Development Fund (which currently is outside the European Union budget) are going on, with potential of partnerships between the EU and the U.K. (as with other third countries, already in place for some Trust Funds),” he said.

During a panel discussion at the Bond Conference this week, the head of Europe for DFID, Sarah Sanyahumbi hinted that development-related discussions are happening off the main Brexit negotiations radar.

“You’ll be aware that there is a process in Brussels separate to Brexit, and we are trying to separate this whole future development discussion from the Brexit negotiations,” she said, in order to insulate aid from politicization.

“The Commission hasn’t actually made its proposal on instruments, but we have a good idea of what might be proposed in May,” when the EU will outline its new budget for the post-2020 period, Sanyahumbi said at the Bond conference.

But it is clear what the U.K. wants: To convert many of the EU instruments into “open” instruments, whereby any donor with relevant interest can pay in for a seat at the table.

“Basically what we’re pitching for is open partnerships, new, open instruments that are open to nonmember states, that are open to any development partner that makes sense depending on what challenge you are actually trying to address,” Sanyahumbi said.

“We’ve seen with the trust funds tackling migration — I know we had a lot of concerns about the trust funds when they started, actually they’ve worked quite well — those were open to the EU and any partners to respond quickly and effectively to large-scale crises, and we’re saying let’s learn the lessons from the trust funds, and let’s incorporate those into the new instruments, so you have open and flexible instruments going forward.”

Speaking at the Bond conference session “Making Brexit Deliver for Development,” Sanyahumbi said beyond this aspiration, the EU and U.K. can only agree broadly “based on mutual good faith.”

“We understand there is a concern among the U.K. NGO community about a loss of U.K. influence in EU development policy. We want to do what we can to maintain the influence and stay as close as possible,” Sanyahumbi said.

She echoed Prime Minister Theresa May’s speech in Munich last month, when May said that when it comes to aid, “while the U.K. will decide how we spend the entirety of our foreign aid in the future, if a U.K. contribution to EU development programs and instruments can best deliver our mutual interests, we should both be open to that.”

Sanyahumbi went on to say, “It’s difficult for me to see where there are specific development areas where the U.K./EU would not naturally converge in our interests.”

She added that development is not something the U.K. ever “gave up” to the EU and asserted it has always “been a parallel process, it’s not something we’re clawing back, we’ve always done development with and through the EU, so we’re looking at continuing that with and through the EU in a different way after we’ve left.”

A love letter to current EU ‘openness’ in aid instruments

DFID’s Europe team is hoping the EU will heed “lessons learned” from its open-funded migration instruments and open up other funding instruments along the same lines. But in a document obtained by Devex, DFID officials get more specific. Praising the recent EU talks about opening up Post-Cotonou funding — whereby the EU will also split the funding into three separate pots for Africa, the Caribbean, and the Pacific group of states, respectively — and makes its own recommendations.

“We welcome that the Commission’s proposal for new Post-Cotonou Agreement is open to external partners. This should be on an opt-in basis at a strategic level, with clear governance arrangements,” the document reads.

For the $37 billion European Development Fund, the Commission’s main funding channel, the document praises the flexibility of EDF to support peacekeeping activities, adding “we can see benefits in the proposal for a separate instrument to support global peace and security activities (including peacekeeping) but would like to continue to engage with discussions about the right structure.”

Again, the U.K. recommends — or requests — that external actors be kept in the loop.

“Given the global and regional nature of peace and security issues, the EU will need to preserve the ability to work with partners who have the relevant capacity and expertise. Any instrument should therefore be open to external partners to contribute on a case-by-case basis where priorities and objectives are shared, and governance mechanisms must ensure that partners have a strategic voice over activities to which they contribute,” the document said.

Then, DFID sets its suggestions for the European Union’s investment instruments. At the moment, the EU is talking about creating a new development-focused subsidiary under the European Investment Bank. The U.K. suggests that “here the same principles of open partnership and sharing of expertise should apply. In the future architecture for external investment, we would like to see particular attention paid to the importance of crowding-in private sector investment, facilitating the long-term development of local capital markets, and leveraging limited ODA [official development assistance] budgets for maximising impact.”

But not everyone agrees. “Before the U.K. and EU embark on any new trust fund or increase efforts to leverage private finance using aid, they should look at the results and impacts of current initiatives on development,” Claire Godfrey, head of policy at Bond for International Development told Devex.

The document also asks that priority be given to the investment needs of least-developed countries and fragile and conflict-affected states, particularly “in the areas of critical infrastructure and sustainable economic development.”

Finally, the U.K. criticizes proposals to “budgetize” EDF, although it acknowledges claims that the move would make the fund more transparent and accountable.

“We believe that such transparency and accountability can be achieved with some creative thinking, even if some parts of the EU’s development programmes remain off budget,” the document reads.

“Specific funding streams could still be ‘ring-fenced’ to guard against funds being diverted to other priorities without due process.”

It argues that an off-budget development program further enables “closer, more strategic partnerships, and thus increases the chances of additional financial contributions.”

But, Godfrey said, “establishing new funds off-budget makes it easier for donors to bypass scrutiny from parliamentarians and civil society, and key international [oversight] on aid effectiveness and tackling poverty,” she told Devex.

Trimmel added that he hopes that while advocating for the setting-up of new mechanisms for joint action in development cooperation beyond the transition period, both the U.K. and EU will keep in mind “that such mechanisms are based on the primary development cooperation objective of eradicating poverty, developed with meaningful participation of the people targeted, are accountable to citizens and parliamentarians, and that they do not trigger disengagement from (some) EU member states on their commitments to development cooperation,” he told Devex.

In the meantime

Though less is known about where the EU and U.K. agree in the long term, the new draft bill issued Wednesday maps out common ground for the transition period, paving an optimistic road which ends abruptly in Dec. 2020.

Sanyahumbi said the U.K. and EU are in agreement that the U.K. will maintain current access to all EU development instruments at least through the current EU budget, known as the multiannual financial framework, or MFF, which runs until Dec. 2020. She said the U.K. had requested access until March 2021, but for now, she said, discussions are focused on the end of 2020. Access beyond that date, she said, will be worked out in coming months, culminating with the EU’s release of its new draft budget in early May 2018 “at the latest,” according to an EU communique.

But for the duration of the current MFF, the U.K. and organizations headquartered therein will have access to EU funding and instruments, and U.K. experts and professionals working at the Commission will remain in place.

“We are making sure that no EU programs in developing countries will be cut, that is our commitment,” Sanyahumbi said.

Sanyahumbi also said that “eligibility of U.K. organizations to participate in EU programs funded by this MFF will be unaffected by our exit for the lifetime of those programs.”

This means that any program funded through the current MFF — even if the contract extends beyond December 2020 — will be honored in full. This allays some fears that the EU will kick U.K.-based organizations off of projects when the clock strikes midnight on 2020.

At the same time, Sanyahumbi’s assurances doesn’t quell all concerns. In January, the EU issued warnings to U.K. businesses and aid organizations that they could find themselves cut off if the negotiations don’t progress far enough by Oct. 2018. If progress falls short, the warnings say, a “hard” Brexit will be triggered, and organizations could be kicked off of projects as early as March 2019.

Between 2012 and 2016, 1.06 billion British pounds ($1.46 billion) was paid by the EU to U.K. development organizations for their work on behalf of the EU. U.K. organizations in 2016 received contracts and grants worth 315.4 million pounds from the EU.

While the new bill suggests progress is chugging along, organizations such as Bond don’t downplay the importance of preparing for a hard Brexit. Many organizations headquartered in the U.K., for example, are eyeing their relocation options abroad, namely Ireland.

About the author

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    Molly Anders

    Molly Anders is a U.K. Correspondent for Devex. Based in London, she reports on development finance trends with a focus on British and European institutions. She is especially interested in evidence-based development and women’s economic empowerment, as well as innovative financing for the protection of migrants and refugees. Molly is a former Fulbright Scholar and studied Arabic in Syria, Jordan, Egypt and Morocco.