An important intervention in the aid debate

A new report by the ONE campaign shows how the UK aid budget will make a difference.

A new report by the ONE campaign shows how the UK aid budget will make a difference.

Today the ONE campaign has published a report that calculates what the UK international aid budget will actually be able to achieve between now and the next election. It is an incredibly important but also very clever interjection into the debate on overseas aid which continues to rage, despite the political consensus at the last election.

All three parties committed to meet the UN target of 0.7 per cent by 2013 in their manifestos, but the Conservatives went even further. Following Gordon Brown's announcement at Labour's 2009 party conference that Labour would legislate to make the commitment a legally binding target, the Conservative manifesto raised the stakes, declaring, on page 117:

A new Conservative government will be fully committed to achieving, by 2013, the UN target of spending 0.7% of national income as aid. We will stick to the rules laid down by the OECD about what spending counts as aid. We will legislate in the first session of a new Parliament to lock in this level of spending for every year from 2013.

Despite this being one of the longest ever sessions of Parliament, International Development Secretary Andrew Mitchell has told journalists that there is no time for the legislation. So the ONE campaign has cleverly turned the debate from input - £8.6bn of your taxes - into outputs.

On the same day as the former Security Minister Lord West tells the Daily Telegraph that our aid budget should be cut in order to reinvest in the Royal Navy, the ONE campaign show us what your taxes can achieve. Lord West says he is "horrified our naval flotilla now comprises only 19 frigates and destroyers". But ONE's report reminds us of the horrifying fact that 50 million women around the world give birth outside of a health facility and without the support of a midwife or health worker.

On the same day we learn of a £2bn aircraft carrier procurement error, Lord West says our ability to recapture the Falkland Islands is at stake. But the ONE report reminds us that this year 358,000 mothers will die in unaided child birth and that 2.6 million stillbirths will result and a further 2.8 million children will die in their first week of life. As I argued when Liam Fox's letter on the 0.7 per cent aid commitment leaked, there is no trade off between body armour and bednets. We can have both.

Mitchell made clear in the Sunday Times (£) yesterday, that development is a process and that aid is just a step on the developing world's journey to self-sufficiency. The UK taxpayer should be proud that their country spends their taxes through a development department (DFID) and not an aid agency (like the State Department's USAid).

Mitchell has decided that DFID will leave India in time for the next UK election because the country will be rich enough to deal with its own poverty. But there will still be around 400 million people living on less than 80p ($1.25) a day in India, more than in the 51 countries of sub-Saharan Africa put together. The £280m a year that the DFID saves will be reinvested not in warships but in water sanitation. Let's just hope that India makes poverty reduction a priority but also be proud that the UK taxpayer made one big difference to the lives of the 1.2 million Indian children who have gone to primary school since 2003 thanks to us.

Richard Darlington was Special Adviser at DFID 2009-2010 and is now Head of News at IPPR - follow him on Twitter: @RDarlo

Richard Darlington is Head of News at IPPR. Follow him on Twitter @RDarlo.

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The Autumn Statement proved it – we need a real alternative to austerity, now

Theresa May’s Tories have missed their chance to rescue the British economy.

After six wasted years of failed Conservative austerity measures, Philip Hammond had the opportunity last month in the Autumn Statement to change course and put in place the economic policies that would deliver greater prosperity, and make sure it was fairly shared.

Instead, he chose to continue with cuts to public services and in-work benefits while failing to deliver the scale of investment needed to secure future prosperity. The sense of betrayal is palpable.

The headline figures are grim. An analysis by the Institute for Fiscal Studies shows that real wages will not recover their 2008 levels even after 2020. The Tories are overseeing a lost decade in earnings that is, in the words Paul Johnson, the director of the IFS, “dreadful” and unprecedented in modern British history.

Meanwhile, the Treasury’s own analysis shows the cuts falling hardest on the poorest 30 per cent of the population. The Office for Budget Responsibility has reported that it expects a £122bn worsening in the public finances over the next five years. Of this, less than half – £59bn – is due to the Tories’ shambolic handling of Brexit. Most of the rest is thanks to their mishandling of the domestic economy.

 

Time to invest

The Tories may think that those people who are “just about managing” are an electoral demographic, but for Labour they are our friends, neighbours and the people we represent. People in all walks of life needed something better from this government, but the Autumn Statement was a betrayal of the hopes that they tried to raise beforehand.

Because the Tories cut when they should have invested, we now have a fundamentally weak economy that is unprepared for the challenges of Brexit. Low investment has meant that instead of installing new machinery, or building the new infrastructure that would support productive high-wage jobs, we have an economy that is more and more dependent on low-productivity, low-paid work. Every hour worked in the US, Germany or France produces on average a third more than an hour of work here.

Labour has different priorities. We will deliver the necessary investment in infrastructure and research funding, and back it up with an industrial strategy that can sustain well-paid, secure jobs in the industries of the future such as renewables. We will fight for Britain’s continued tariff-free access to the single market. We will reverse the tax giveaways to the mega-rich and the giant companies, instead using the money to make sure the NHS and our education system are properly funded. In 2020 we will introduce a real living wage, expected to be £10 an hour, to make sure every job pays a wage you can actually live on. And we will rebuild and transform our economy so no one and no community is left behind.

 

May’s missing alternative

This week, the Bank of England governor, Mark Carney, gave an important speech in which he hit the proverbial nail on the head. He was completely right to point out that societies need to redistribute the gains from trade and technology, and to educate and empower their citizens. We are going through a lost decade of earnings growth, as Carney highlights, and the crisis of productivity will not be solved without major government investment, backed up by an industrial strategy that can deliver growth.

Labour in government is committed to tackling the challenges of rising inequality, low wage growth, and driving up Britain’s productivity growth. But it is becoming clearer each day since Theresa May became Prime Minister that she, like her predecessor, has no credible solutions to the challenges our economy faces.

 

Crisis in Italy

The Italian people have decisively rejected the changes to their constitution proposed by Prime Minister Matteo Renzi, with nearly 60 per cent voting No. The Italian economy has not grown for close to two decades. A succession of governments has attempted to introduce free-market policies, including slashing pensions and undermining rights at work, but these have had little impact.

Renzi wanted extra powers to push through more free-market reforms, but he has now resigned after encountering opposition from across the Italian political spectrum. The absence of growth has left Italian banks with €360bn of loans that are not being repaid. Usually, these debts would be written off, but Italian banks lack the reserves to be able to absorb the losses. They need outside assistance to survive.

 

Bail in or bail out

The oldest bank in the world, Monte dei Paschi di Siena, needs €5bn before the end of the year if it is to avoid collapse. Renzi had arranged a financing deal but this is now under threat. Under new EU rules, governments are not allowed to bail out banks, like in the 2008 crisis. This is intended to protect taxpayers. Instead, bank investors are supposed to take a loss through a “bail-in”.

Unusually, however, Italian bank investors are not only big financial institutions such as insurance companies, but ordinary households. One-third of all Italian bank bonds are held by households, so a bail-in would hit them hard. And should Italy’s banks fail, the danger is that investors will pull money out of banks across Europe, causing further failures. British banks have been reducing their investments in Italy, but concerned UK regulators have asked recently for details of their exposure.

John McDonnell is the shadow chancellor


John McDonnell is Labour MP for Hayes and Harlington and has been shadow chancellor since September 2015. 

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump