Scotland referendum heaps questions over future of UK aid

After a bitterly fought campaign, voters in Scotland go to the polls Thursday to decide whether or not to break away from the United Kingdom. Independence is now a genuine possibility — with at least one major opinion poll now showing the “Yes” camp edging into the lead. Much uncertainty remains, though, over security arrangements, currency and European Union membership, all of which will certainly have knock-on effects far beyond Edinburgh. In terms of international development, Scottish independence could have far-reaching implications for staff, contractors, partners and beneficiaries of the U.K. Department for International Development and other agencies handling funds from the world’s second-largest bilateral donor. The sector is also wondering what a brand-new donor like a future independent Scotland could bring to the table. More aid or less aid? The U.K. parliament’s International Development Committee has estimated that losing Scotland would mean slashing the U.K. aid budget by 8.3 percent or about 1 billion pounds ($1.63 billion), based on the drop in gross national income. It’s unclear where those cuts would be made. Would DfID drop entire programs or slice off expenditure across the board? One risk, according to James Smith, a professor of African and Development Studies at the University of Edinburgh, is that the agency would make savings “in areas where it’s harder to attribute impact or may take fewer risky investments.” But would that be offset by more aid from Edinburgh? The ruling Scottish Nationalist Party has pledged to spend 0.7 percent of Scotland’s GNI on official development assistance and to enshrine that commitment in national law. That budget of 1 billion pounds per year would put Scotland in the midbracket among European donors, comparable to Finland and spending more than its neighbor Ireland, noted James Mackie, an expert at the Netherlands-based European Centre for Development Policy Management. Scotland is wealthy enough, the SNP claims, to even consider spending 1 percent of GNI on foreign aid. Though it defers to Westminster on all other aspects of foreign policy, Scotland’s devolved government already handles a modest overseas aid budget of 9 million pounds per year — a third of which is ring-fenced for Malawi — and manages a climate justice fund worth 6 million pounds to date. But could a country with a population of just over 5 million really take on a 1.5 billion pound aid budget — a 166-fold increase? Some are not convinced, with DfID insisting that this proposal has “not been costed.” Meanwhile, former U.K. international development minister Alan Duncan was quoted in the Scottish press as saying the idea was “not credible. If you believe that, you'd believe anything.” Taxpayer support Yet another question is whether Scottish taxpayers would support high spending on foreign aid? David Hope-Jones, principal officer at the Scotland Malawi Partnership, a nongovernmental civil society network that insists it is neutral on the question of independence, believes so, referring to the “sheer number of people engaged, the strength of commitment [and] the positivity in public perception” of Scotland’s 150 year-long links with the African nation. Political will may be a powerful driver too, according to Smith. “If independence is a political project rather than an economic one, then Scottish aid will be an important part of nation building,” he said. However, for Sir Malcolm Bruce — a Scotsman sitting in Westminster, where he chairs the IDC — the point isn’t so much the percentage of ODA, but the fact that resources for the poor will instead be “urgently needed for state building.” Independence, the IDC report on the matter asserts, would divert ODA from front-line delivery to administration, while DfID has also agreed that the division would risk “duplication of support costs.” Playing to Scotland’s strengths Initially at least, Scotland may channel much of its increased budget through multilateral or other funds. But even then, said Mackie, it would still need to have the capacity to evaluate spending, participate in policy discussions and gather information. Getting to the point where Edinburgh manages its own aid program, though a “huge jump,” is not impossible: “The expertise is available,” he said, with five years a “perfectly possible” timeframe to reach that stage. And where would Scotland focus its attention? An SNP white paper from 2013 outlines four principles: more and better aid, debt relief, gender equality and “do no harm.” Those commitments don’t provide much detail and may not be especially groundbreaking. Assuming an independent Scotland is admitted to the EU, for instance, it would be signing up to the same commitments on policy coherence for development as its fellow member states. Scotland may, however, have a chance to set the bar higher. NIDOS, a network of 110 Scottish development NGOs, is neutral on the outcome of the referendum but pushing for policy coherence to be the central focus of a future Scottish international development policy, whatever the outcome of Thursday’s vote. Meanwhile, Scottish Minister for External Affairs and International Development Humza Yousaf has been vocal in claiming that an independent Scotland would be very different from the United Kingdom, whose foreign affairs and trade policies have “undermined much of the good work that DfID has done.” Adding value In international development, Yousaf said Scotland has three value-added strengths: renewable energy expertise, a relationship with Malawi that is both “bottom-up and top-down,” and a strong academic and research sector. Smith agreed there was “a lot of potential” to benefit from Scotland’s “proportionally very large and internationally focused higher education sector.” The experience with Malawi, with which Scotland has had a government-level cooperation agreement since 2005, though, may be overstated. “There has been a huge increase in activity there, but only over a relatively short period of time. There is no replacement for decades of experience,” he said, adding however that “the initial idea of focusing so strongly on one country has worked quite well in terms of collaboration among Scotland’s aid actors.” DfID is the single-largest donor in Malawi but could it learn something from Scotland? Hope-Jones believes so: “With some notable exceptions, we generally haven’t found that the public, high-level aspirational statements from DfID on increasing its engagement with the Scotland-Malawi civil society links have been met with tangible activity.” The Scottish government, on the other hand, has “in the past decade built a strong reputation of being consultative and responsive to civic society,” he said. “Many Scots believe that the people-to-people links with Malawi exemplify something quite distinctive, perhaps unique, in Scottish culture compared with other regions of the United Kingdom.” And as a small player, Mackie said, Scotland may be both more focused with its limited resources — since small donors “tend to understand that they have to focus if they’re going to have impact” — and more prepared to build coalitions within multilateral bodies like the EU or the United Nations, “because they know they can’t do it by themselves.” Larger donors like DfID, meanwhile, “don’t necessarily exploit those possibilities as much.” Questioning impact For Yousaf, being small with fewer geopolitical interests is an opportunity to become more innovative and creative, and take more risks. As a very young donor, Scotland should also accept that it might make mistakes, “but that shouldn’t hamper our confidence in the work that we’re doing.” Fewer historical ties might be advantageous, explained Smith, but the downsides of being new on the scene are both “a relative lack of experience and a risk of trying to be too innovative and blaze international trails.” Bruce resents the suggestion that Scotland could deliver a “purer” form of aid, arguing that Scotland would be “a small player” and need “a long time before it could offer something distinctively different.” Scotland’s International Development Fund, he added, is “overpromoted” by the Scottish government “as if it were on the same level” as the U.K.’s 11 billion pound annual aid program. Hope-Jones disagreed, saying the fund delivers impact “at a scale disproportionate to the relatively modest financial investment made,” and did well to focus on limited countries rather than spread itself too thin. “It has never sought to be a mini-DfID,” he said, “but rather something genuinely unique.” In recent comments to the Scottish parliament, Yousaf pointed to the commitment to development index, which measures overall impact by taking into account policies beyond aid levels: “On that index, the U.K. is in a commendable eighth position, but the other nine of the first 10 countries on the index are small independent nations.” Smith, though, said that achieving ambitions such as ensuring policy coherence would be “exceedingly difficult” and questioned the existing capacity in Scotland, cautioning that there was “not a lot of international development expertise in the Scottish government currently to manage growth, learning and policymaking.” Westminster has repeatedly warned that the potential influence of a small Scottish aid program would pale compared with that exercised by the U.K. “Scotland wouldn’t have the track record, the legacy, the reach [of U.K. aid],” said Bruce. “[Independence] would diminish U.K. aid without adding any huge value.” Yet another donor Something that has been “too easily overlooked” in the whole debate, Mackie said, is the risk of fragmentation in the aid sector. “All the debates around aid effectiveness talk about the need for donors to work more closely together and ideally not duplicating their work,” he said. “Of course, that also means not creating new funds and new donors.” The SNP has committed to provide continued support to programs to “avoid any sudden disruption” and work with DfID to ensure “a smooth transition phase for programs on the ground.” Indeed, the Scottish government already liaises with DfID on Malawi, pointed out NIDOS chief Gillian Wilson. While the SNP has not made specific proposals for creating a new aid agency, it seems likely that an independent Scotland would want at least some control over how its aid budget is spent, even if to begin with, as Yousaf told Westminster MPs, “there would probably be a heavier tilt toward multilateral institutions.” Delivering its aid budget through DfID to start with, for instance on a 10-year reducing scale, has also been suggested, Bruce said. But if that’s the case, he said, “DfID would need to know that — and how would that work if Scotland were poaching staff?” Channeling 100 percent of Scottish ODA through existing delivery organizations such as NGOs, the United Nations or the EU — which is what the smallest EU member states do — might sound radical, Mackie admitted, but it could be more effective than creating a new development agency. Yet he did not rule out that option. “I don’t think the [solution] is you simply don’t create a new donor — it’s more a question of thinking it through carefully. Long term, we are probably very slowly moving to an era where bilateral aid funds need to start disappearing and more money needs to start going into global funds,” he said, adding that the latter are less subject to political changes and less based on donor-recipient relationships. “As a donor, that would like to be seen as progressive, Scotland might want to think carefully about that.” Check out more insights and analysis provided to hundreds of Executive Members worldwide, and subscribe to the Development Insider to receive the latest news, trends and policies that influence your organization.