UK aid to China has a 'whiff of tied aid,' says Champion

The United Kingdom’s development assistance to China has a “whiff of tied aid” according to Sarah Champion, chair of the parliamentary International Development Committee, which monitors the U.K.’s aid program.

Her comments came during an evidence session with the Independent Commission for Aid Impact — the U.K. aid watchdog — where members of parliament were also told that the aid budget pays for 40% of U.K. diplomatic costs in China because “40% of their time is dedicated to ODA fundable work,” according to Hugh Bayley, a commissioner at ICAI.

By law, U.K. aid funded projects must be “likely to contribute to a reduction in poverty” but in recent years, some programs also pursue secondary benefits to the U.K., such as commercial advantages. These have included the controversial cross-government Prosperity Fund, which ostensibly specialized in economic development but was criticized for an alleged lack of focus on poverty reduction. The FCDO has now taken over control of its programming.

Tied aid is described by the Organisation for Economic Co-operation and Development as “offering aid on the condition that it be used to procure goods or services from the provider of the aid.” Officially, the U.K. does not allow tied aid.

But Bayley told MPs that ICAI “saw less emphasis on poverty reduction in the China programs than you would expect in programs in low-income countries.” He said U.K. aid spending in China “secured agreement from China to import a U.K. developed health technology from a U.K. company worth hundreds of millions of pounds to the U.K. in exports, and that was supported by U.K. ODA.”

The Prosperity Fund had delivered £912 million ($1.24 billion) of additional U.K. exports to China, “which were achieved through aid spending,” said Bayley.

“I’m shocked by that … that’s not the primary focus of what ODA is supposed to be, indeed I thought that that undermined the eligibility of that money to be categorized as ODA,” said Champion. Asked if that was correct, Bayley refused to answer.

Gideon Rabinowitz, who also worked on ICAI’s China review, said that it was too early to see the full development benefits of aid programs in China. He added: “The fact that the U.K. exports have already been generated at that level, suggests that the projects will have to meet quite a high development impact threshold, which is very possible.”

Development programs by the U.K in China have also focused on work related to global health and climate change, members of parliament were told.

The meeting again highlighted ongoing tensions between the FCDO and ICAI, with Bayley saying: “If we, as a watchdog, are going to help government spend ODA more effectively and achieve better value for money for the taxpayer, it would be helpful if they were open and shared with us provisional information.”

ICAI was refused access to the classified national security strategy on China, but did receive a verbal briefing. “To understand what the strategy was would have enabled us to do our job as a watchdog … more effectively,” said Bayley. “The strategy clearly sees ODA as a tool to be used for the pursuit of quite a number of the objectives in the strategy.”