Spending targets or Results targets? Lessons from foreign aid. 

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March 12, 2015 by Paul Goldsmith

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There is an interesting debate going on around our defence budget at the moment. Having told other members of NATO that they should be spending 2% of GDP on defence, David Cameron is about to miss that target in the UK. Because there is an election coming up, and manifestos to be published, the entire UK military industrial complex has been mobilised to demand that we keep to our pledge, trotting out the usual warnings of catastrophe if we don’t.

The term ‘UK military industry complex’ may be one you haven’t heard of but it works pretty transparently, in that military generals argue for spending on weapons produced by firms in the defence industry then get well paid directorships of those firms when they leave the armed forces. So let’s just say there are quite a lot of vested interests in these requests for money. But the biggest problem with the spending target, and the biggest reason the military industrial complex want a spending target is that it is a spending target. There is no link to result achieved. Hence, the 2013 Public Accounts Committee review of defence spending reports that “The Ministry of Defence purchases, holds and uses more than 710m items of 900,000 different types, from bullets and missiles to medical supplies, clothing and spare parts for vehicles, ships and aircraft. Project teams within the department can order as much consumable stock as they might ever need because they are only billed for when they use it… there are no incentives in place to prevent over-ordering.”

This is similar to what happened to the UK’s target of spending 0.7% of GDP on Foreign Aid. That target, explained by David Cameron as being important to ‘send a message that the UK leads the World in foreign aid’ was actually far more about rebranding the Conservative party. For the same reason, Cameron whipped his MPs in 2008 to support Labour’s Climate Change Bill, which committed us to be so far the only country in the World to have a target of cutting carbon emissions by 80% by 2050. How he must be kicking himself now that his government is, in his reported words,  having to deal with ‘green crap’ that has resulted from the bill. Yet so desperate was he to detoxify the Tory brand that he committed himself to this type of ‘declamatory legislation’ (making a law that is more a PR commitment as there are no sanctions for not achieving it), and followed it up early in the Coalition Parliament by passing as military bill committing us to spend 0.7% of GDP on foreign aid.

At the time, the House of Lords’ economic affairs committee warned that this target “wrongly prioritises the amount spent rather than the result achieved; it makes the achievement of the spending target more important than the overall effectiveness of the programme.”

Put in simpler terms, if you link spending to national income in perpetuity you will encourage wasteful spending. An example of this was that in the last month of last year the Department for International Development had to spend a quarter of its £12bn budget, stuffing multilateral  aid organisation with more money than they knew what to do with just to meet an arbitrary target. We don’t know how many lives they have saved, we don’t know how many homes were built, we don’t know how many civil servants were trained, we know nothing but the amount of money spent. That is surely not enough. 

According to Dominic Lawson in the Sunday Times, only 10% of that aid budget goes to humanitarian aid. The rest, according to Camerson, helps give the UK ‘soft power’, in that it makes foreign countries like us. But the price of spending more on a Aid is often spending less on defence, and the protection of our security should be the first role of a sovereign government. As the military industrial complex point out quite correctly, some of our enemies are only interested in what ‘hard power’ we’ve got. Don’t we have to also ‘send a message’ about that?

But most importantly the electorate needs to remember that this is your money they are spending. 

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