Why Australia’s new PM should rethink foreign aid cuts

The following article was originally published on The Guardian Poverty Matters blog. It is reproduced here by kind permission of the author.


On Saturday, Tony Abbott, leader of the Australian Liberal party, won the Australian federal election, ushering in new political leadership after six years of tumultuous Labor party rule by Kevin RuddJulia Gillard, and Kevin Rudd again.

Days before the election (controversially, after the media blackout imposed on all political parties by the Australian Electoral Commission, thus avoiding any political debate), Abbott had announced plans to cutAustralia‘s aid budget by A$4.5 bn (£2.6bn) in the next four years, reneging on promises to increase aid spending to 0.5% of gross national income (GNI).

Now that Abbot holds the keys to the country that is the fifth-richest per capita and ranks second in the UN’s human development index, it is critical that the Liberals, parliament and the public understand the context and repercussions of such a decision.

In 2013-14, Australian aid totalled A$5.7bn. A large sum, but it must be put into perspective: the figure is equal to 0.37% of GNI, or less than half of 1%. In comparative terms, the Australian government allocatesA$56.6bn to healthcare (pdf), A$36.6bn to education (pdf) and A$29.9bn to military spending (pdf), and the Liberals have promised not to make cuts to these areas.

Australia has made a commitment – along with other countries that comprise the Organisation for Economic Co-operation and Development’s development assistance committee (OECD DAC) – to increase aid spending to 0.7% of GNI.

This pledge was made in 1970 and has been reiterated in the UN and OECD systems as the global standard. The Netherlands, Norway, Denmark and Sweden are among the countries that have met the 0.7% commitment, and the UK, whose economy has not fared nearly as well in the financial crisis as Australia’s, will reach 0.7% this year.

Indeed, an OECD peer assessment in 2012 found that Australia’s healthy economy put increases in international aid allocations well within reach. What is more, Australia used to be much more generous – in the 1960s and 70s, aid spending climbed to 0.65% of GNI.

Despite this, Australia has lowered its aims with a commitment to reach just 0.5% of GNI to help achieve the millennium development goals, although Labor, despite substantial increases in foreign aid, deferred meeting this commitment until 2017-2018 and the Liberal party has provided no timeframe for meeting it. Australia will fail to meet even this lowered target by the time the goals expire in 2015.

What will be the effect of the cuts?

It is unclear which parts of the aid budget the Liberals plan to cut and so it is difficult to say what the precise effects would be. According to Tim Costello, chief executive of World Vision Australia, World Bank researchestimates that it costs approximately $2,000 (£1,278) to “holistically” save a life.

Charity campaigns have thus argued that Abbott’s proposed cuts represent 449,888 lives that are now at risk. This nicely demonstrates the point, but of course, aid does not work in such a straightforward way in practice, and it would be disingenuous to suggest that the Liberal party is in effect allowing half a million people to die.

Judging by statements the Liberals have made in the past year, there are three key areas that may be in the line of fire. The cuts could be tobudget support to developing country governments, the more intangible areas of programming such as governance and rule of law, or to contributions to multilateral organisations.

Here is why even these less sensationalist readings of the cuts have important negative consequences. Budget support (giving money directly to recipient governments to spend on their development priorities), while not always appropriate, is hailed as the most effective aid modality to build capacity in developing countries because it uses and strengthens government systems (pdf).

Building capacity in this way leads towards less dependence on aid in future. It is also in keeping with best practice aid principles (pdf) in recognising that recipient countries are drivers of their development and should own the process.

A focus on so-called practical projects, such as building infrastructure, could suggest a decrease in funding to areas such as governance and rule of law. While these areas are more intangible – and it is notoriously difficult to demonstrate quick-win results that you can see when you build a road, for instance – they are the fundamental building blocks on which society is built.

Without a responsible government that is accountable to the people and the existence of the rule of law to protect rights, practical projects risk feeding a corrupt system that does little to eradicate poverty in the long run.

Reorienting aid from multilateral organisations to more bilateral aid reduces Australia’s “aid toolbox” and, potentially, the effectiveness of aid. Multilateral aid can be a good way of sharing the fiduciary and political risks inherent within aid, leveraging the expertise of different donors (pdf) and ensuring that aid at the country level is not fragmented (pdf) and fails because donors each try to go it alone, rather than work together. Ensuring a balance between bilateral and multilateral aid modalities is important to achieve effective development in diverse contexts.

So, before hastily cutting the aid budget to reduce the country’s deficit, Australia’s new prime minister and his party would do well to consider the impact of such cuts – to Australia’s reputation as a good international citizen that adheres to long-standing commitments, and to good aid practice. There is still time to reconsider.

Lisa Denney is a researcher at the Overseas Development Institute

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