Filed under Government Aid

Giving What We Can’s assistant director and head of research, Will Crouch, has today published a letter in the Financial Times, highlighting the problems with the government’s current conception of ‘value for money’ and ‘cost-effectiveness’ in the field of foreign aid. You can read the article here:

Some excertps:

 The UK’s Department for International Development refers to “value for money” when describing its priorities. But it doesn’t have a sensible metric for what counts as “value”, even though health economists do: namely, the Disability Adjusted Life Year, or DALY…

Using this metric, there has been excellent research… applying the scientific method to development in order to work out which programmes help people the most with every pound spent on them…

By funding the rotavirus and pneumococcal vaccines, it is paying $100 for every DALY averted… If the government were to increase funding to child deworming, it would pay only $3.41 for every DALY averted. In comparison with these vaccinations, deworming is like a 96 per cent off sale, or 3,000 per cent extra free. That’s value for money.

This research is never explicitly mentioned on DfID’s priority list, and is either being ignored or not taken seriously enough. Because of this, some of the most cost-effective – but unsexy – interventions, like deworming schoolchildren and promoting handwashing with soap, are neglected.

David Cameron today announced that the UK will increase its funding of two ‘highly cost-effective’ health interventions: the provision of pneumococcal and rotavirus vaccinations. 814 million pounds will be donated, which the Prime Minister states will treat 80 million children and save 1.4 million lives in the developing world.

Health researchers have estimated that the best use of the pneumococcal vaccine provides one DALY (disability adjusted life year- the equivalent of giving someone a year of life at full health) for every $100 spent. Thus, if all of the investment were spent on pneumococcal vaccines, it would save around 13,200,000 years of healthy life! This puts the intervention in the category of highly cost-effective measures.

However, one can still do more than 30 times better… And that is very important. It’s like getting a “96% off” sale, or 3000% extra free, in the cost of curing life-wrecking diseases in the third world. For example, if Cameron had instead decided to boost the treatment of soil-transmitted helminthic infections, he could have saved 30 DALYs (rather than 1) for every $100 spent. Or, by directing aid to the Schistosomiasis Control Initiative, roughly one DALY would by provided with every 2 pounds and 9 pence ($3.41) spent.

Likewise, here you can see how the DALYs/$100 provided by Rotavirus immunisations (the other vaccinations pursued by DfID’s aid boost) are dwarfed by certain measles and other vaccinations.

Cameron/ DfID’s conception of cost-effectiveness may be confused by their tendency to think about cost-effectiveness as “getting vaccines from GSK at the lowest possible price”. Vaccines, however, are only important for the health outcomes (and other good side effects) they produce. Thus, rather than principally focusing on getting the best price for vaccines, we should focus on getting the best price for health outcomes. For this, DALYs are the best available measure.

In keeping the UK’s pledge to raise aid to 0.7% of GDP by 2015, and in consciously boosting aid to more effective causes, this is certainly a welcome move in the right direction. We just hope that with their increased focus on cost-effectiveness, DfID and David Cameron will spot the even greater opportunities to help some of the world’s most vulnerable people offered the most cost-effective interventions.

Sources:

http://www.independent.co.uk/news/uk/politics/pm-announces-extra-814m-for-vaccines-2296883.html

http://www.sciencedirect.com/science/article/pii/S0140673607601950

http://www.sciencedirect.com/science/article/pii/S0140673607601950

Yahoo! “news” has published an interview with Oxfam’s chief executive, Barbara Stocking. It gives an insight into how Oxfam’s top management consider and decide between different aid projects and goals, with a particular focus on the relationship between political/ security aims and development aims.

On this second issue, the article includes the following quote from David Cameron, from a speech to the House of Commons last week:

“We need to broaden the argument for the aid budget. We should say quite clearly the DfID budget is also about conflict prevention and trying to stop things upstream that would cost us more downstream. Often the modern equivalent of the battleship is the C-17 loaded with aid.”

And the modern equivalent of aid is…?

The UK government says “we will stick to the rules laid down by the OECD about what spending counts as aid.”

However, as the article highlights:

The problem is that if Britain meets its requirements to the letter it will actually be downgrading its aid contributions. France accepts the payment of overseas student fees as aid, for example, where Britain does not. Other countries include payments for refugees in their aid budgets. The UK doesn’t.

See here for the full article at Yahoo! Talking Politics.

The Good News!

The UK Department for International Development (DfID) is honouring its commitment to increase aid spending to 0.7% of GDP by 2013. And it will fund the Schistosomiasis Control Initiative (SCI) with $25 million over the next five years. SCI is one of Giving What We Can’s top rated charities, with one year of preventative treatment for Schistosomiasis (’bilharzia’) costing just 50p. Development Secretary Andrew Mitchell highlights that this makes SCI’s work not only hugely cost-effective for healthcare, but also one of the most powerful ways to keep children in school:

Education is one of the best routes out of poverty, yet millions of children are unable to fully benefit from attending school because they are weakened by these diseases.

British aid will provide up to 75 million lifesaving treatments - ensuring that ill health doesn’t stop millions of the most vulnerable children getting a basic education and breaking the cycle of extreme poverty.

It’s a very positive sign that the British government are taking cost-effectiveness in development aid seriously. See here for the Guardian’s report on DfID’s pledge.

The Bad News.

DfID is, at the same time, doubling the amount of aid it channels to conflict-ridden states. This aid will now take up a third of all UK aid spending (previously, it was one quarter). Many working in the international development sector are angered by this militarisation of aid. Save the Children’s Patrick Watt asked:

“What is the real driver of aid allocation? Is it poverty, is it need and the ability to use money effectively or is it the agenda of the National Security Council? We do need to have a balanced approach to aid allocation that reflects the principles of the 2002 International Development Act which stipulates that all aid should be for poverty reduction.

“…[T]he countries that will lose out will be poor but stable countries like Ghana or Tanzania… You will end up in a slightly perverse situation, if we’re not careful, where countries with a lot of poor people that happen not to be on the geopolitical radar are losing out.”

Joan Ruddock MP also pressed David Cameron on the change, arguing that:

“I have always supported the case for greater conflict prevention. But conflict prevention needs to be understood and practised by the military themselves.”

David Cameron defended the switch against this charge, saying, “we’re mad if we don’t put money into mending broken states where so many of the problems of poverty come from.”

See here for the Guardian’s article into this ‘militarisation’ of aid.

Furthermore, the increase in aid will only begin in four years’ time. For millions of people, four years from now will be too late for them to receive life-saving medicine, get an education, receive adequate nutrition in early childhood… There are further fears, too:

the budget will stay fairly flat in the first three years of the review, and then jump by 28% in the fourth year. One expert said: “That is such an enormous jump, you have to question whether they seriously mean to do it.”

There are also fears about the impact of DfID cutting admin spending from £72m to £34m. The Guardian reports:

“There’s a danger of falling for the mythology of faceless bureaucrats in London, as if there are lots of people doing nothing very useful,” said a former senior diplomat.

“For example, a report comes in on human rights abuse and it sits in an in-tray because there’s not enough staff with quality time to sort out priorities and send the right stuff up to ministers in timely fashion, for decision and action. I’ve seen that sort of thing happen even on present staffing, so there are risks in cutting too hard.”

See here for the Guardian’s excellent article -which paints the new aid budget as moving Britain to a ’soft-power’ rather than ‘hard-power’ nation- from which those last quotes were taken.

The Millennium Development Goals recently received a major boost from the international community. On 22nd September, speeches of support for the MDGs flowed from all corners of the United Nations, and the international community pledged $40bn to help achieve the goals by 2015. The Guardian reports,

Not only donor countries but also developing nations promised to spend more on the poorest people in their societies. Tanzania promised to increase health spending from 12% to 15% of the national budget by 2015 and increase the numbers of health workers it trains and employs. Rwanda’s president, Paul Kagame, who has played a prominent role in the summit and was warmly praised a few days ago by Ban as a “stellar leader”, pledged to spend 15% of the budget on health by 2012. His country has already brought maternal mortality down from 1,071 to 383 per 100,000 births between 2000 and 2008.

Hillary Clinton, the US secretary of state, announced a new alliance on maternal health between USAID, the UK, Australia and the Gates Foundation, which will focus on the dearth of family planning in developing countries. Norway, Australia and France were among those promising substantial new money. Pledges also came from aid organisations, philanthropic foundations and businesses.

Nick Clegg was keen to show leadership. He said, “My message to you today, from the UK government, is this: we will keep our promises and we expect the rest of the international community to do the same.” The Guardian also reports that Clegg

committed the UK to double the number of women’s and children’s lives saved by reorienting Britain’s aid programme to put their needs at its core – in addition to new funding for malaria

See here for the full Guardian article.

On 1st July, the IMF agreed to a $12.3bn debt relief package for the Democratic Republic of Congo. The package could reduce the DRC’s debt by 90%; the Democratic Republic of Congo currently pays $300m each year in debt relief. The debt relief package was offered because:

The International Monetary Fund and the World Bank said the country had made good efforts to reform its economy and governance in recent years. -BBC

The DRC has, however, suffered continued violence and poor governance since the official end of the Congo War (in which 5m people died) in 2003. The BBC reports that:

…[T]he deal was opposed by representatives from Canada and Switzerland, who voiced concerns about governance reform… But on Thursday the international finance organisations voted the measures through, with Canada and Switzerland abstaining.

See here for the full BBC article.

Relief Web has lots of really good information on the DRC here.

Andrew Mitchell is the new secretary of state for International Development. He has affirmed the government’s commitment to increase aid spending to 0.7% of GDP by 2013 (a target initially set by Labour). Mitchell has highlighted maternal and infant mortality, women’s empowerment and combating malaria as key priorities. Mitchell also wants the private sector to play a far greater role in development projects.

Mitchell has also, promisingly, stressed the importance of accountability, transparency and value for money. In an opening speech, he stated, “British aid pays for 5 million children in developing countries to go to school every day. That’s roughly the same number as go to primary school in Britain, yet it costs only 2.5% of what we spend here. That is real value for money.” An independent aid watchdog is to be set up, £100 million is to be diverted from less to more cost-effective projects, and a UKAid Transparency Guide will aim to ensure DFID publishes accessible, detailed information about its aid spending.

Aid agencies are generally supportive of these changes. There is some worry, however, about Mitchell’s ‘coherence agenda’, which may involve more aid money being spent by the Foreign Office on military-humanitarian projects such as those in Afghanistan. Patrick Watt from Save the Children commented, “We’d be concerned by any long-term trend in reduction of overseas development aid going to DFID. We’ve seen this taken to an extreme in the US where one-third of USAID money goes through the State Department or Pentagon.” Kathleen Chapman from Oxfam added, “We’ll push for the government to avoid militarizing aid,” said Chapman. “The top message needs to be that aid is focused on people who most need it.”

There’s a very good IRIN article about the outlook for UK aid here, while DFID has its own short article, and video of Mitchell’s speech, here.

In the Queen’s Speech on Wednesday, it was announced that:

Draft legislation will be published to make binding my Government’s commitment to spend 0.7 per cent of national income on international development from 2013.

The 0.7% target was originally set in 1970 by a UN resolution, and has been reaffirmed multiple times. Yet 39 years later only 5 of the 22 countries who made this agreement have met the target, and the UK is currently giving just 0.43%.

This has made many people wonder whether the UK will ever meet this target, and also why we should believe such targets. The proposed legislation to bind the UK to meet its target may turn this around and similar pieces of legislation in the future could help make such targets much more meaningful for the UK and other countries. However, the legislation may still be scrapped before it leaves draft status: it will not be brought into law until after the next election, and is opposed by the Conservative Party.