What is 'mutual prosperity' and what does it mean for UK aid?

LONDON — The United Kingdom government has increasingly advocated a “mutual prosperity” approach to aid spending, under which it argues that the benefits of development programs should not just be felt overseas, but also closer to home.

But despite being frequently referenced by ministers, mutual prosperity remains without a codified definition or set of guiding principles. The Independent Commission for Aid Impact, the watchdog responsible for scrutinizing U.K. aid, recently described it as a “broad and somewhat ambiguous concept.”

The lack of formal classification means there is no record of what is being spent on mutual prosperity programming. This has led to fears that official development assistance is at risk of being diverted from poverty reduction to projects that are seen as furthering domestic and commercial interests.  

“An aid program with mixed objectives can lead you into all kinds of murky deals and trade-offs,” said Alan Harding, a development economist who previously worked for the U.K. Department for International Development. Alongside several experts who spoke to Devex about the issue, Harding referenced the Pergau Dam scandal of 1993 — when U.K. ODA to Malaysia was linked to an arms deal — as an example of where unclear aid policy could ultimately lead.

The U.K. Prosperity Fund is often cited as an embodiment of the mutual prosperity agenda and was the first U.K. aid fund to clearly outline its pursuit of secondary goals. The government states that the £1.2 billion ($1.5 billion) fund “aims to support the inclusive economic growth needed to reduce poverty in partner countries [as its primary purpose] … The Fund also looks to create opportunities for international business including UK companies ... as a secondary benefit.”

Advocates say it is a response to what recipient countries want, and is a crucial way of catalyzing private sector funding to achieve the Sustainable Development Goals.

While not a new concept in British politics, ICAI’s report said the policy focus on mutual prosperity “appears to have intensified” after the country’s 2016 vote to leave the European Union. Referencing the government’s plan for the U.K.’s international realignment post-Brexit, the report added: “Some UK government documents tie [mutual prosperity] explicitly to the ‘Global Britain’ agenda.”

The concept of mutual prosperity is “a bit slippery,” said Tamsyn Barton, ICAI’s chief commissioner.

At one end of the spectrum in how people understand and use the term is the idea that economic development “will ultimately benefit the U.K. through the expansion of global trade. [That’s] not at all controversial and has been a continuous policy since the beginning of [the U.K.] aid program,” Barton told Devex.

But “at the other end [of the spectrum] is the idea that aid programs could be used to benefit —  directly and commercially — U.K. economic interests. At its extreme, it would involve tying aid [meaning that only U.K. suppliers can bid for government aid contracts], which currently the government is committed not to do. That is much more controversial given the primary purpose of aid is economic development and welfare in developing countries.”

The 2018 National Security Capability Review described U.K. development work as demonstrating “the UK’s commitment to eradicating poverty and meeting the Sustainable Development Goals whilst also enhancing mutual prosperity by building the foundations for UK trade and commercial opportunities in horizon markets.”

At an ICAI event on the issue in January, a DFID economics adviser who commented from the audience said mutual prosperity is a policy response to recipient countries who wish to move “to equal relationships based on trade and mutual interest.”

Highlighting the multitrillion dollar funding gap to meeting the SDGs, he said: “Part of what we’re trying to do with mutual prosperity is to make aid work better, make the private sector work better for development.”

“It’s also more than aid. Part of the deal with mutual prosperity is trying to make the wider government architecture work better for development. I think that’s something that’s often missed and it's really important.”

As an example of mutual prosperity programming, he cited DFID’s work helping to improve Indonesian timber standards to allow more imports to the U.K. He also said banks could provide an online option for a proportion of peoples’ savings to be used for development purposes, to “leverage potentially trillions of pounds of new funding.”

Harding argued that such resources could be better used in low-income countries with greater poverty and developmental needs — instead, the Prosperity Fund focuses on middle-income countries. “If the U.K. wants to develop new commercial ties with Indonesia, including in the forestry sector, there is nothing to stop the FCO/DIT [Foreign & Commonwealth Office and Department for International Trade] doing so ... without the use of scarce ODA resources,” he said.

Under different names, the concept of mutual prosperity is not unique to the U.K., and experts said development programs that emphasize the national interest have existed for a long time, used by donors such as Japan, the United States, and more recently, the Netherlands.

Some mutual prosperity programming results in “genuine win-wins,” said Ian Mitchell, senior policy fellow at the Centre for Global Development. But he said most cases are likely to see “some trade off [between] development impact and U.K. impact. That’s what we want to understand better.”

In terms of potential benefits for the U.K. government, the ICAI report identified the opportunity to improve public support for aid, improve coherence, and enhance soft power. But it also identified numerous risks, including a “loss of focus on the primary objective of reducing poverty; diversion of aid away from the poorest and marginalised … and reducing development to economic prosperity.” Some definitions of prosperity — for example that used by the Legatum Institute’s Prosperity Index — take into account not only trade and economic growth indicators, but also measures of education, health, well-being, and quality of life. But these factors rarely feature in U.K. government rhetoric on the issue.

ICAI said the U.K.’s position as a development superpower could be lost in pursuit of the mutual prosperity agenda, and that there was a risk of “weak accountability structures, especially those governing secondary benefits.”

A source knowledgeable of Prosperity Fund programming, which is delivered by multiple government departments, said it was likely that staff from the Foreign & Commonwealth Office and Department for International Trade would be rewarded for their delivery of secondary benefits — those that benefit the U.K. — rather than the primary benefits to recipient countries.

While that’s concerning to the development sector, it isn’t to at least some U.K. government ministers. “Clearly there are people in the government and Conservative Party attracted to the idea of using aid to generate trade,” Mitchell said. But he added: “The government quickly does open itself to risk if that money is seen to be really badly spent.”

There is wide agreement among experts that a more rigid framework on mutual prosperity is needed. A separate ICAI review into U.K. development policy in Ghana recently called for “clear guidance on how UK aid resources should be used in implementing mutual prosperity objectives.” Harding said there should be greater transparency on decision making and a full independent review to establish clear guidelines of acceptability.

He likened mutual prosperity policy to riding two horses at the same time: “If the horses are leading you in different directions then an accident is likely to happen.”