European aid scam

Governments like to massage figures to put themselves in a good light, so for unemployment statistics they try to keep the figures down and for spending on popular items they boost them. Pressured by mass campaigning to increase overseas aid spending, Europe’s governments have now been caught out trying to inflate the amounts they report. And it is not just a small discrepancy – a third of all overseas development spending they claimed last year failed to result in new aid to developing countries.Civil society groups – such as those in our network across Europe – have long argued that increases in aid are vital for the fight against poverty, and surveys show that citizens also want their governments to spend more on this. More aid would mean that millions of people in desperate poverty could gain access to health, education and productive opportunities; and improving the lives of people in poverty across the world will also help Europe.

Responding to all these pressures, European governments have been the drivers of international negotiations on development spending over the last five years. These last year included a range of processes where further increases in aid were pledged. If these pledges are honoured, Europe will provide at least $38bn more in aid every year from 2010 onwards. When the EU announced these new aid targets last May, the UK finance minister Gordon Brown boasted: “Europe is saying it will double its aid; it is putting that money into health and education, particularly in Africa”.

Civil society groups were almost unanimous in welcoming this announcement. But now we are redoubling our watchdog efforts and keeping a wary eye on whether and how governments implement their pledges. The watchdogs are already barking because European governments are using official rules to include in their official development assistance (ODA) figures spending that does not contribute to poverty reduction in developing countries.

Both the European Commission and the Organisation for Economic Cooperation and Development (OECD) have roles to play in compiling and publishing ODA figures, and the figures they released in March and April this year showed EU member states to be rapidly increasing their aid spending. Yet a new report – EU Aid: Genuine Leadership or Misleading Figures – by a broad range of NGOs from right across the EU finds that some €13.5bn of reported European ODA in 2005 did not provide any new aid for developing countries. Their report is part of the NGOs’ drive to ensure that aid increase pledges are implemented in full.

Almost all European governments include finance for debt cancellation and also the amounts they spend in their own countries on refugees and students from developing countries. Our calculations at Eurodad were reached after compiling and extrapolating available official figures, and they show that over €9bn of claimed EU aid in 2005 was spent on the cancellation of debt to Iraq and Nigeria. Almost all of this debt arose from dubious deals by export credit agencies that in effect subsidise European companies’ operations in developing countries. This sort of spending did not benefit the poorest people in those countries, and it should have been obvious that the business deals would go sour and result in bad debt. This is why cleaning-up these past problems should not be at the expense of the poverty-reduction spending that is now so urgently needed. As one Danish NGO activist commented recently, people are understandably incredulous when they realise that significant amounts of so-called aid money “is not moving 5,000 kilometres from Denmark to Africa, but 500 metres from the Ministry of Foreign Affairs to the Treasury!”.

The cancellation of debt is vital, but it must be done additionally and from a separate budget. This was agreed at the United Nations Financing for Development agreement signed at Monterrey in 2002. The other spending items included in European official headline aid figures were on housing refugees within European countries (€840m) and on educating foreign students in European countries (€910m). Spending on refugees and foreign students in Europe is clearly important, but these are not expenses the public expects to see described as development assistance; they provide no new resources for developing countries and do not contribute directly to the welfare of the poor in those countries.

We believe that this spending must be removed from the official figures. The fact that a number of governments do not include these amounts should serve as an example to the others. But in preparation for a meeting in 2007 to discuss reform of the aid reporting system, several European governments are already testing positions which would weaken rather than strengthen the rules. Among the extra items they want included are spending on climate change mitigation and on security.

Civil society groups will be working hard in the run-up to next year’s meeting to challenge their governments to clean up their aid reporting and ensure that reliable and rapid figures are produced in future. This is an argument that has to take place in EU capitals with the involvement and support of European Commission and OECD officials. Aid reporting has until now been seen as a technical agenda unworthy of high-level political attention. But our report has already succeeded in getting the attention of ministers in many countries and we are optimistic that continued public attention will force a clean-up of aid accounting practices.

Some governments – such as Sweden and Luxembourg – provide comparatively large amounts of development aid and do not greatly exaggerate their spending. By contrast, governments such as those of Italy, Greece and Spain provide proportionally far less money and also pile on extras that should not be included. When these are stripped away, some of the richest EU member states can be seen to make aid contributions that as a percentage of their national income are very close to those of the newcomer member states.

Beyond these numbers, civil society groups also intend to continue monitoring aid quality and its impact on the ground. They are seeking to ensure, among other things, that money is not allocated and spent for geo-political reasons, that it does not come bound with conditionalities and other strings, nor with burdensome duplicate reporting requirements.

Beyond aid, there is a set of vital policy matters that still need Europe’s attention, ranging from trade to taxation policies to banking. European NGOs will continue to focus on these, at the same time as watching the aid increase pledges.

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