The British government is undermining its commitment to tackle poverty in the developing world by spending hundreds of millions of pounds of aid through a handful of UK-based consultancy firms, according to a report from the campaigning group Global Justice Now (GJN).
The study, which focuses on the work of Adam Smith International (ASI), says the use of consultancies diverts aid money from those in greatest need, with the authors accusing the Department for International Development (DfID) of a “shift towards the private sector”. The report also questions how such spending sits with the UK’s 2001 decision to “untie” its aid from British commercial interests.
GJN’s study – The privatisation of UK aid: how Adam Smith International is profiting from the aid budget – says the London-based firm has won at least £450m of aid-funded contracts since 2011, and received nearly £90m of DfID money in 2014 alone.
While the latter amount may be a small share of the total £6.8bn bilateral aid budget for that year, GJN points out that “it is still more than the entire amount spent on human rights and women’s equality organisations, or almost twice that spent on programmes to tackle sexually transmitted diseases including HIV and Aids”.
The report claims that ASI is using DfID money to pursue a “free-market” agenda in developing countries. It says that Nigerian electricity consumers are facing price increases of up to 45% because of what it terms “a controversial energy privatisation programme supported by UK aid through a multi-million-pound project implemented by ASI”.
In Afghanistan, meanwhile, local civil society organisations report that the country’s new minerals law – drafted with ASI’s support – has done little to improve their lot, according to the study’s authors.
Aisha Dodwell, the campaigns and policy officer at GJN, said many British taxpayers would be shocked to discover how much aid money was going to big UK contractors.
“UK aid could be used to strengthen public services, support civil society, and build democratic and accountable institutions,” she said.
“It’s not just the amount of money that Adam Smith International is getting that is wrong. The free market reforms that they are pushing in some countries are based on an outdated and discredited development ideology that has been in no small part responsible for entrenching poverty and exacerbating inequality across the developing world.”
GJN argues that the increasing use of UK consultancy firms squeezes out smaller companies in poor countries and is evidence of a tendency for DfID to enter partnerships with businesses and fund private sector development projects that have “questionable benefits for poor communities”.
The organisation calls on DfID to explain why it hires for-profit, UK-based companies such as ASI rather than using its own staff or firms in developing countries. It also urges the department to be more open about contractors’ costs, and to publish an action plan on spending more through organisations in developing countries.
A DfID spokeswoman defended the department’s use of contractors, saying: “UK aid is focused on tackling extreme poverty, helping people in some of the most fragile and dangerous places on Earth, including war zones and disaster areas. We draw on specialist expertise from charities, NGOs and the private sector to get the job done and get the best value for taxpayers.”
ASI – which describes itself as non-partisan and “a wholly different, separate and independent” organisation from the Adam Smith Institute from which it originated – flatly dismissed suggestions that it pursues a free-market agenda. It said it provides DfID with the technical skills and expertise that it is not “feasible or economic” for the department to retain in-house on a permanent basis.
“We do not govern or decide the UK’s aid policy,” said ASI in a statement. “We respond to the needs and requests of governments and donors to tackle complex development challenges that require specialist expertise.”
The firm said that the projects mentioned in the report had been “taken out of context and misreported”, adding: “The two DfID programmes singled out were conceived and started by the last Labour government and have been continued at the strong request of the Afghan and Nigerian governments because of their evident success.”
Diane Abbott, the shadow international development secretary, said UK aid should be “first and foremost about tackling poverty and inequality and not benefiting UK business”.
She added: “If consultant expertise is really needed, as companies like Adam Smith International claim, then it’s insulting in this day and age for DfID to continue to spend millions on UK-based consultants when there is such a wealth of skills and experience to be found among civil society and public services of those countries that aid money is supposed to be going to.”
The GJN report comes 15 years after the UK untied aid and 14 years after the 2002 International Development Act stipulated that all British aid needs to be focused on poverty reduction.
A recent report from the Commons international development committee warned that the UK’s efforts to fight global poverty risked being sidelined by the government’s new aid strategy, which is intended to help the world’s poor while also advancing Britain’s security and prosperity.