UK cross-government strategy in crisis after funds suspended

The National Audit Office headquarters along Buckingham Palace Road in London, United Kingdom. Photo by: Tony Hisgett / CC BY

The government of the United Kingdom has launched a “capability review” to examine three aid funds managed by the National Security Council and worth almost 2 billion pounds ($2.6 billion) annually, following a bruising investigation by the National Audit Office.

The review includes the suspension of the six-month-old Empowerment Fund, and a review of two others funds — the Conflict, Stability and Security Fund and the Prosperity Fund — just weeks after the body responsible for scrutinizing public spending on behalf of Parliament found evidence that many departments spending aid under a new government strategy are insufficiently transparent and managed chaotically, and are rushing aid allocation in order to meet spending benchmarks.

The decision to launch the review came from Prime Minister Theresa May’s new National Security Adviser Mark Sedwill, whose office oversees the funds.

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A government spokesperson told Devex that the review “was not launched because of the National Audit Office's report” and “is part of our ongoing work to ensure we’re delivering value for taxpayers and results for the world’s poorest.”

However, development suppliers worry it will affect funding for the 1.3 billion pounds ($1.7 billion) Conflict, Stability and Security Fund — by far the largest of the three funds — which operates programs in many fragile and conflict-affected regions such as Syria and Yemen.

The funds are managed by the National Security Council but hosted by the Foreign & Commonwealth Office under the U.K.’s cross-government strategy, which aims to spend 30 percent of official development assistance through departments other than the Department for International Development.

Spending on the suspended Empowerment Fund — a 140 million pound-per-year ($182 million) pro-democracy fund introduced by Foreign Secretary Boris Johnson in February — was yet to begin. Officials were still in the process of forming its strategy and had not yet issued invitations to tender when its operations were suspended. The spokesperson said that “work has been paused while the review takes place.”

The third fund under review — the 260 million pound-per-year ($338 million) Prosperity Fund — was introduced in the 2015 U.K. Aid Strategy and targets middle-income countries for economic reform and removing barriers to trade, mostly through ODA. The fund is only in its second phase of operations and began issuing tenders last year. More than 80 percent of its resources would likely be eligible for bidding by development organizations, a government official told to Devex, if work continues as planned.

The largest fund, the CSSF, operates as a contingency fund for fragile and conflict-affected environments, operating rapidly to expedite funds when and where crises strike. The structure is unique in that the majority of the funding is awarded by the Foreign & Commonwealth Office, with other government departments bidding into the fund and then operating alongside CSSF-funded activities for one coherent, CSSF program. While the fund’s operational structure is the first of its kind in the industry, it is also drawing criticism from the NAO and aid experts for its ambiguous management and possible dilution of the ODA rules.

“They have to run this activity together, so if there is an FCO-led piece of activity going on in Jordan, it will be run in conjunction, for example, with a Department for International Development-operated, CSSF-funded program,” Melinda Simmons, head of the CSSF at the FCO, explained during the Bond Funding for Development conference last month. “They’ll all form part of the same program with components run by different departments, and they’re accountable for their programs to the embassy,” she said.

The U.K.’s ambassador to Jordan chairs a program board, which holds all cross-government work in the country to account, including programs implemented by three cross-government funds and 10 government departments.

The aim of the unusual governance structure is “fewer ad-hoc ideas in-country and more integrated proposals,” with less duplicative work on the ground, Simmons said.

The CSSF is also unique in its ability to blend ODA with non-ODA funds — for instance, from security or military spending — a feature that has caused concern among politicians and the civil society community about the government’s ability to measure and hold departments accountable for ODA spending.

“In many of these new funds, there is a huge amount of blending going on,” Alison Evans, chief commissioner of the Independent Commission for Aid Impact, the parliamentary watchdog charged with evaluating aid spending, told Devex and others during a panel discussion, “The State of U.K. Aid”, hosted by the U.K. Aid Network on 12 July.

“When we go about our reviews we’ve found increasingly — we found it in our migration review, we’ve found it in a CSSF review that we’ve just started — we confront this issue of, where is the government drawing that line?”

She also expressed concerns about how government mechanisms will be able to follow the money. For a body like ICAI, “which is only mandated to look at ODA,” she asks, “how can we usefully navigate that boundary, and say meaningful things about effectiveness of programing when actually there is quite a lot of blending going on?”

Update, August 9: This article was amended to clarify that Alison Evans was speaking during a panel discussion on 12 July. Update August 14: This article was updated to include additional comments from the government

For more U.K. news, views and analysis visit the Future of DFID series page, follow @devex on Twitter and tweet using the hashtag #FutureofDFID.

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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.