The UK’s Liberal-left was Wrong on Mass Immigration and Now is Wrong on International Aid

Just as is has done on mass immigration, the liberal-left needs to reconsider its stance on international aid. Its current position does not serve those it is supposed to represent or the cause of international development.

Just as on the issue of mass immigration, the liberal-left in the UK has lost its way on international aid. After almost two decades of broad support for mass immigration, there is now growing recognition of its adverse impact on low-income people, prompting new thinking and policy proposals. But no such change is evident – yet – with respect to foreign aid. Here, current government policy – a massive surge in spending to unprecedented high levels - is virtually unchallenged by anyone in the UK’s liberal-left. Yet the parallels between immigration and foreign aid are striking.

The liberal-left is now embarking on a major revision of its stance on mass immigration. The case for change was set out recently by the respected economist Paul Ormerod, a well-known figure in Labour Party circles, in The Guardian newspaper (24th March, Open borders or fair wages: the left needs to make up its mind). Citing evidence from Germany following the opening up of eastern Europe, Ormerod shows that real wages in the lowest segment of the labour force have fallen “almost continuously” since the mid-1990s, while at the top end there is a mirror image and real wages have grown strongly. Mass immigration has increased supply at the lower, relatively unskilled end of the labour market, driving down wages and increasing inequality. This distributional impact is also evident in the UK. Here the opening up of the labour market was begun by the Labour Government in the late-1990s, in hindsight, in Ormerod’s view, “a major betrayal of the very people the party purported to represent”. Or, as Ed Milliband, with the monosyllabic eloquence beloved of politicians puts it, Labour “got it wrong” on mass immigration. Net migration into the UK is now running at over one-quarter of a million annually, the majority of this at the low-skilled end of the labour market. The impetus of policy now is focused on how to reduce this flow of ‘cheap’ supply.

How is this relevant to the UK’s approach to international aid? First, a quick reminder of the essence of the UK’s current policy. The dominant feature here is the growth in spending. The UK’s aid budget has risen to £12.4bn annually. In 2009, the last year of the previous government, it was £7.2bn. In five years it has grown by more than 50% in real terms and now accounts for 0.7% of GNI. It is an astonishing, unprecedented increase, especially remarkable in the context of a depressed economy and large-scale cuts in most areas of public spending, save for ring-fenced health and education, where expenditure has been broadly static in real terms. This spending phenomenon has received almost universal support from the liberal-left and has proceeded with little opposition. To understand why this is happening, three reasons can be cited that draw directly from the immigration experience.

First, debate is stifled by the implicit suggestion that to question aid is to risk basic impropriety. Even more than immigration, foreign aid is deemed to be a cause of ‘the good’. To question its efficacy is to side with ‘nasty’ forces who “just don’t care” or even to advocate actively against the world’s poor and downtrodden. Worse, questioning aid is regarded as having about it the whiff of xenophobia and racism, effectively conversation-stopping terms for the liberal-left. Discussion therefore has to tread lightly for fear of straying into inadmissible, invalid terrain – ‘bad thoughts’ that should be hushed before they give rise to ‘incorrect’ speech. Rises in aid spending are deemed to be intrinsically a ‘good thing’. The effect of this is (1) to proscribe common sense instincts and the reasonable questions that arise from them - such as “Does ‘good aid’ need more money?”, “Who is really benefitting from the growth in aid budgets”?, “Can aid actually ‘crowd out’ indigenous development”?, “Why is £5bn more foreign aid spending better than £5bn more on health and welfare”? – and (2) to leave aid as a space that only professionals in the burgeoning aid industry have the knowledge and vocabulary to fill. As a consequence, in the mainstream media and among the political class, discussion is polarised, slipping into binary simplicity, a ‘two legs good, four legs bad’/black and white world without nuanced analysis. And while interminable debate on aid’s efficacy does take place within the development community, none of the UK’s main aid organisations – not one – has publicly questioned the legitimacy of the current spending policy.

Second, negative effects largely leave the liberal elite untouched. The UK’s middle class have benefitted from mass immigration because of the reduction in the price of goods and services they consume; it is lower-skilled, lower-income people who have seen their wages fall. In relation to aid, resources spent here are at the expense of other potential public expenditure uses – such as health, education, welfare and infrastructure. And while these are not only for lower-income people, it is the case that they are relatively more reliant on public expenditure and cuts here impact on them disproportionately. The middle-classes, on the other hand, have the means to buy their way around the limitations of reduced state funding.

The most direct beneficiary of a higher aid budget is the UK’s aid industry, a well-connected bandwagon of NGOs, academics, researchers, and (increasingly) commercial consultants and contractors who all feed on the new spending. Though not homogeneous, this is certainly not a grouping of the low-skilled and low-paid. On the contrary, some have enriched themselves as the UK’s foreign aid poverty business has grown. The UK’s largest aid contractor is ASI. Their profits and turnover (now over £100m) have trebled during the 5-year reign of the Coalition Government. In 2012, ASI’s money-spinning ways briefly shot to the public eye with ‘aid fatcat’ headlines in the media over the 7-figure payouts ASI directors were awarding themselves. The ensuing mini-storm quickly abated however, and in 2015 cash-rich ASI was still reported to be awarding its directors vast payments. Interestingly, while the liberal-left has obsessed over the private sector’s involvement in the National Health Service (NHS) and Labour has proposed a 5% cap on profits, ASI’s profits stand at 14% of sales. Aid it seems is more lucrative than health, but while moralising over profits in the latter is permissible, it is seen to be pedantic nit-picking in the international poverty business.

Third, analysis of efficacy is superficial and decision-making subject to political whim. The case for mass immigration, long-deemed by the liberal-left to be a positive influence on the UK economy (and society), only begins to fall apart when its adverse distributional impact on the least prosperous section of the population is revealed. The case for spending more on international aid, that not only is this morally the ‘right thing’ but that it is making a major and sustainable difference to poverty levels, becomes increasingly fragile when exposed to a modicum of informed analysis. At an aggregate level, there is simply no strong correlation between aid expenditure and poor countries’ development. And there are more specific indications of UK aid’s dysfunctionality. Four examples from the world of DFID make the point.

• The Independent Commission for Aid Impact (ICAI), the official body charged with scrutinising UK aid, rated DFID’s work in the flagship area of economic development – where funding is set to double – as ‘Amber-Red’, “performing relatively poorly”, the second bottom category. Among the main criticisms (and there were many) was that DFID had no “theory of change that clarifies how its activities cohere as a consistent endeavour”. In aid-speak, this is as close as it gets to saying that DFID hasn’t a clue what it is doing.

• The same ICAI – and the National Audit Office – has reported on DFID’s internal “culture of fear”, it declining staff capacity and distorted incentive structure. Although in principle accountable to Parliament through the International Development Committee (IDC), in practice the IDC has become dominated by self-serving voices from the aid industry and its highly professional lobbyists.

• The ‘spend-spend-spend’ imperative is, by far, the biggest realpolitik concern in DFID and manifests itself in numerous ways, most dramatically in panicky, desperate efforts to shovel resources out the door. The effect can be surreal. At the end of 2013, at the same time as public expenditure was being cut to the bone elsewhere, DFID found that it had an underspend of £1bn, and just two months to spend it. After a frantic search, it eventually unloaded its billion pound ‘burden’ into assorted funding black holes in the UN system, the efficacy of which will be virtually impossible to ascertain.

• DFID’s increasing reliance on multilateral organisations to consume its growing budget results in spending being ‘splashed’ into organisations for no compelling strategic reason other than to spend it. For example, DFID now gives a £2.1bn to the International Bank for Reconstruction and Development (IBRD) in Washington. This is almost three times the level of a few years ago, amounting to 12-14% of the IBRD’s total funds. Yet DFID only has 4.25% of the voting weight in the IBRD.

The liberal-left’s failure on international aid in the UK has now been sealed with its endorsement – given after almost no debate - of the backbench bill to enshrine the UK government’s commitment to fix spending on aid at 0.7% of GDP. Aid spending will thus sail onward and upward as the economy improves, all done on the questionable premise that more funds contributes usefully to aid objectives. What is more certain is that other areas of government spending, directly affecting low-income people in the UK, will be denied resources by this commitment, and the increasingly well-endowed individuals and organisations that comprise the UK aid industry will grow fatter. In this context, the liberal-left’s abandonment of critical, nuanced analysis on aid, not only ill-serves development objectives but, mirroring the position it held (until recently) on mass immigration, is a condescending dereliction of the people it’s supposed to represent. As in mass immigration, and as the recent election illustrates, the only voices that appear alive to their valid concerns belong to the far-right. It remains to be seen whether, like mass immigration, it takes the liberal-left another fifteen years to discover a more considered position.

Patricia Oldman is an independent consultant and researcher, with more than twenty years’ experience in the international development field, working with a range of different agencies.

Photo credit: DVIDSHUB / Foter / CC BY

For more on aid and its future please see GP's e-book: The Donors’ Dilemma: Emergence, Convergence and the Future of Foreign Aid, Guest Edited by Andy Sumner and Tom Kirk