Britain's International Development Policies

A History of DFID and Overseas Aid

B. Ireton

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN: 9781349444847, 9781137272324
• eBook ISBN: 9781137272331
• Topic: Social Sciences
• Subtopic: International Relations
• Index: Social Sciences

History of Britain's official international development efforts, beginning with its colonial era and then following the establishment of a new Ministry created by Prime Minister, the Rt Honourable Harold Wilson.

1

Introduction

The Ministry of Overseas Development was created by the late Harold Wilson when he became Prime Minister in 1964. Until 1997 it was either a separate Ministry for Overseas Development (ODM) under Labour governments (1964–70 and 1974–79) or a distinct part of the Foreign and Commonwealth Office under Conservative governments but with its own Minister and Permanent Secretary, known as the Overseas Development Administration (ODA) (1970–74 and 1979–97). In 1997 the Labour government again created a separate ministry called the Department for International Development (DFID) and this has continued under the current Conservative/Lib Dem Coalition government. In what follows the author will refer simply to each of them as ‘the Department’ to cover the period from 1964 to the present time.

In order to set the work of the Department in its historical context, the next two chapters pre-date the work of the Department. Chapter Two provides a brief account of the British government’s policies towards, and official development assistance to, its colonies. Chapter Three seeks to explore both the changing international context after the Second World War and how the government responded to it in terms of aid policy, and the machinery of government changes that led up to the creation of the Department.

In subsequent chapters, the history of the Department from 1964 has not been recounted in chronological terms but rather by particular themes. Thus, Chapter Four focuses on the stated mission of the Department, arguing that, not withstanding some important deviations, most notably in the 1980s, the underlying mission throughout has been, to a greater extent than often suggested by some external observers, the reduction of poverty in the poorest countries.

A more contemporary account of the work of the Department might have combined Chapter Five (Development Policy) and Chapter Six (Humanitarian Aid), but the author decided to keep them separate. Chapter Five also provides an account of the Department’s role in debt relief and, in recent years, its role in wider development issues beyond aid, such as trade and the global environment.

Chapter Seven seeks to analyse the rationale behind the choices made between the various forms of aid, and setting them in an historical context. This leads on to an account of the main bodies for which the Department has had full or partial responsibility for. It explains why the Department shed its responsibilities for these bodies in the 1990s, with the exception of CDC PLC’s investment portfolio (Chapter Eight).

The commercial motives for aid have aroused considerable passion and controversy on both sides of the aid debate over the years, and particularly the Aid and Trade Provision scheme, designed to subsidise the financing terms for British exports in the context of the international credit race to subsidise export finance to developing countries. These issues are explored in Chapter Nine.

For many the touchstone of the government’s commitment to international development is the volume of aid it has been prepared to provide, particularly against the UN aid target of 0.7 per cent of Gross National Income (GNI) established in the 1960s. Although at the time it was held to be some reflection of the needs of developing countries, today it is essentially a burden-sharing issue for donors and a stick for developing countries to beat them with. Britain’s performance against the UN aid target is explored in some detail in Chapter Ten in a wider international context. It also tries to explain the intricacies of defining official development assistance internationally and how it has changed over time. Official assistance counts towards the UN aid target if it is sufficiently concessional and is for the purposes of development of the recipient country.

Chapter Eleven seeks to explain the changes in the way the Department managed itself, both in response to wider civil service reform and the challenges it faced in responding to a changing development agenda and aid programme management.

Chapter Twelve offers some insights into the way the Department’s impact on development might be judged, though it does not offer a detailed definitive judgement on the impact of Britain’s aid programmes over nearly half a century, which it is better for others to assess and in greater depth. I have left to this chapter a brief comment on the public debate on aid, which has not materially changed over recent decades, but which in recent years has had a growing significance.

I have tried to keep the book up to date during its gestation. It reflects the changing political and economic relationships between the West and the emerging BRIC countries (Brazil, Russia, India and China) and importantly what is likely to be the impact of the recent financial crisis and the fiscal deficits and debt problems of donor countries and their dialogue with developing countries on macro-economic management issues. In particular it reflects the 2010 General Election manifestos regarding aid and the Coalition government aid policies and, importantly, public presentation in the context of its re-affirmation of achieving the UN aid target of 0.7 per cent of Gross National Income (GNI) by 2013, despite the substantial reductions in other areas of public spending over the period of the present government.

I have written this book mainly for those academics and students, and professional development practitioners, interested in contemporary political history and international development and aid, in particular Britain’s official contribution towards the latter. However, I hope it is also written in a way that would make it of interest to the more general reader concerned with international development and aid issues, both in Britain and abroad.

2

Britain’s Colonial Development Effort

Introduction

This chapter seeks to provide a brief account of Britain’s development policies and assistance in relation to its colonies. It is not intended to be an authoritative and detailed account of colonial development. Nor does it seek to assess the impact of colonialism more generally on the future development of the countries concerned. For these purposes, and also for Chapter Three, I have drawn on the substantial resource material available from official records and other works, including the five-volume study of the period 1921–65 by D. J. Morgan which was commissioned under the Peacetime Series of Official Histories initiated by Prime Minister Harold Wilson in 1969.¹

The so-called White Commonwealth (Australia, New Zealand and Canada) became independent between 1867 and 1901 and together with the Union of South Africa (1931) became Dominions within the British Empire. On partition, India and Pakistan became independent members of the Commonwealth in 1947. Ghana and Malaysia became independent in 1957.

When Harold Macmillan visited Africa in 1960 he made his memorable ‘Wind of Change’ speech to the South African Parliament in which he said ‘the wind of change is blowing through this continent and whether we like it or not this growth of national consciousness is a political fact. We must all accept it as a fact and our national policies must take account of it’.² Much of Africa became independent in the early 1960s – for example, Nigeria (1960), Kenya (1963), Tanzania (1964), (Tanganyika and Zanzibar, having already become independent separately, formed a Union in 1964) and Zambia (1964). Southern Rhodesia (now Zimbabwe) made a unilateral declaration of independence in 1965 under white minority rule until formal independence in 1980.

Apart from Southern Rhodesia, over which it had no control, by the end of the 1960s Britain was left with only a small number of colonies. They consisted of Hong Kong, Gibraltar and the Falkland Islands which did not wish to become independent because of their regional political situations. Hong Kong was returned to China under the terms of the 99-year lease in 1997. There were otherwise a number of small territories in the Indian Ocean, the Atlantic and the Pacific and Caribbean. By 1970 it was the clearly stated policy of the British government that any remaining territory wishing to become independent should be allowed to do so, but any who wished to remain what were then still termed Dependent Territories could do so. In the event the Seychelles in the Indian Ocean, the Solomon Islands, the Gilbert and Ellice Islands (now Kirabati and Tuvalu respectively) and the New Hebrides (now Vanuatu) – a condominium jointly administered by Britain and France – in the Pacific, opted for independence in the early 1970s. Thus, Britain entered the 21st century with the following overseas territories, as they are now known: Gibraltar in Europe; Anguilla, British Virgin Islands, Cayman Islands, Montserrat and Turks and Caicos Islands in the Caribbean; Bermuda, the Falkland Islands, St Helena and Tristan da Cunha in the Atlantic; and Pitcairn in the Pacific. Thus, some might say, not least the UN Committee on Decolonisation, Britain’s colonial period has yet to come finally to an end.

By the 19th century Britain had acquired an empire of almost unprecedented proportions, perhaps epitomised by Queen Victoria being crowned Empress of India in 1876. The end of empire could be said to have occurred effectively at the end of the Second World War when Britain’s political and economic position in the world was greatly diminished. If not then, the Suez Crisis of 1956 demonstrated that Britain could no longer act independently of the United States.³ The Falklands War of 1982 showed a determination to defend the interests of one of its colonial peoples but that cannot be said to be part of Empire.⁴

Against this background the chapter sets out Britain’s efforts to help develop its colonies in the period from the end of the First World War to 1964, when the Department was established. There were two fundamental policies adopted by Britain in the 19th century that impacted on its colonies. The first was a belief in international free trade which can be traced back to the repeal of the Corn Laws in 1846. It lasted while Britain was the dominant industrial power and until it faced serious competitors who were seen as fostering their industries by domestic market protection. The Great Depression of the 1930s finally brought this era to an end, though the Ottawa Imperial Economic Conference of 1932 re-affirmed a policy of imperial preference. The second important policy framework for the colonies was that set down by Prime Minister Gladstone in the 1860s, namely that colonial governments should so far as possible be financially self-supporting. They should each be able to finance their recurrent expenditures and their capital investments either by a local recurrent revenue surplus or by way of domestic or overseas loan finance from the market which they would be expected to service out of future revenues.

Development assistance

For the purposes of this chapter we distinguish between three broad categories of colonies which Britain recognised for the purpose of deciding whether or not to provide development assistance, as the Gladstonian principle of financial self-sufficiency gave way over time to the political and economic realities of the 20th century.

Certain colonies, because of their economic condition, required some measure of assistance (grants-in-aid) to balance their recurrent budgets in order to provide a minimum level of public administration and physical and social infrastructure. Those that were either in active receipt of grants-in-aid or were thought to be in ‘danger’ of requiring such help were known as Treasury-controlled colonies. This meant that the British government retained a much closer oversight of their budgets both to justify the level of grants-in-aid which were already being voted annually by Parliament under the Colonial and Middle Eastern Vote, and to avoid other territories pursuing policies that might result in them needing this form of assistance in the future.

At the other end of the spectrum were colonies that already had what was termed responsible government (that is, a measure of self-government) such that Britain did not then think it appropriate to provide development assistance. This excluded from such assistance most notably the Indian sub-continent. The irony of the term ‘responsible government’ will not be lost on today’s reader familiar with debates about aid and responsible economic management and good governance. A fortiori, Britain did not expect, at that stage, to provide development assistance to countries after they became independent.

The third category comprised the remaining colonies not in receipt of grants-in-aid and still having constitutional arrangements which gave the Colonial Office, not full control over their policies and budgets, but a substantial measure of influence over their affairs.

Following the First World War Britain experienced a substantial and persistent level of unemployment. It was reasoned that if the colonies were to undertake additional capital projects requiring imports from Britain the unemployment situation at home would be ameliorated. Thus the Trade Facilities Act of 1924 contained provision for the Colonial Secretary to support loans through interest subsidies for agreed investments taken out by the territories for which he was responsible; £2 million over five years was envisaged for projects in the field of public utilities. There were two conditions: first, the projects should be those which would have been implemented anyway at a later date but which could now, with support, be brought forward; and, second, that they should promote employment in Britain. Its take-up, however, was limited because of the terms of the assistance and the two conditions imposed. The Palestine and East Africa Loans Act of 1926 provided up to £10 million to guarantee loans to the colonies. Again the take-up was limited partly because law officers concluded that loans under this scheme could not also benefit from interest subsidies under the earlier Act.

With the experience of the above Acts the debate continued about the economic problems of Britain and the role the colonies might play in alleviating them. There was also a growing official and political consensus that a longer-term and more systematic approach was required for the development of the colonies. On the other hand the Gladstonian principle continued to caution against actions that would result in a long-term financial commitment to improving the social welfare of the colonial peoples beyond which the colonies themselves could sustain. The grants-in-aid to the weaker colonies were now running at about £250,000 per annum and there was no enthusiasm for this help either to widen or deepen.

The 1929 Colonial Development Fund Act provided for the establishment of a Fund (the CDF) for ten years of up to £1 million per annum. It was to be used for approved capital schemes that would promote the economic development of the colonies narrowly defined (for example, it excluded support for general education). It was available to all the colonies save those already with ‘responsible government’. Thus, from the outset, colonial development assistance was to focus mainly, though not entirely, upon the West Indies and Africa. In presenting the Bill to Parliament the interests of Britain in colonial development rather than the interests of the colonies themselves was again the dominant theme. By the end of the CDF in 1940 nearly 600 separate schemes had been approved with a total value of £19.3 million and a contribution from the CDF of £8.9 million. Of the latter £5.7 million was provided in the form of grants and the balance by way of loans.

There were no formal rules for the tying of funds to British goods and services. But colonial administrations had been made aware of the link between the use of the CDF and the objective of promoting British trade and reducing unemployment. Indeed the 1931 White Paper on Public Expenditure⁵ stated that wherever possible the Colonial Office should concentrate on schemes which would give ‘the greatest and speediest benefit to this country’.

The 1940 Colonial Development and Welfare (CD&W) Act potentially marked a new phase in Britain’s policy towards colonial development. But it came at an extremely difficult time. On the positive side the new Act allowed for a wider definition of development: the Secretary of State could finance schemes ‘likely to promote the development of the resources of any colony or the welfare of its peoples’. The 1940 White Paper⁶ set out the government’s new approach and concluded (paragraph 6) that it was time to revise the principle ‘that a colony shall have only those services which it can afford to maintain out of its own resources’. Thus funds could be provided for certain recurrent expenditures over a substantial number of years, for services such as agriculture, education, health and housing. The new Act also had a ten-year timeframe and the Treasury were still concerned to avoid a situation of perpetual financial dependency. It was envisaged that while funds would be provided for individual schemes they should be in the context of development programmes prepared for a period of years ahead. The reason for this was reflected in the guidance to colonial governments, consistent with paragraph 11 of the White Paper, that such programmes should focus on improving their economic situation so that they might increasingly finance their own social and other services.

The Colonial Office sought an annual provision of £10 million plus £0.5 million a year to be earmarked for research programmes increasingly seen as crucial to the long-term development of the colonies. With the outbreak of war a compromise was eventually agreed for up to £5 million a year for a period of ten years, including £0.5 million for research, with the prospect of a review after five years.

By the time the Bill reached Parliament circumstances could hardly have been less propitious. Although the concepts behind the Bill were largely accepted, there was criticism about its realism. Indeed one backbencher commented, when the Bill was introduced at its Second Reading in the House of Commons, that they had listened to a pre-war Minister making a pre-war speech on a pre-war Bill.⁷ In a statement to Parliament at its Second Reading in the House of Lords the Colonial Secretary acknowledged that with the intensification of the war ‘much we had hoped to do under th...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Preface and Acknowledgements
• Tables and Figure
• 1   Introduction
• 2   Britain’s Colonial Development Effort
• 3   The Creation of the Department: From Colonial to Overseas Development
• 4   The Department’s Mission: 1964–2013
• 5   Development Policies
• 6   Natural and Manmade Disasters: The Department’s Response
• 7   Aid Channels
• 8   Associated Bodies
• 9   Commercial Issues: The Tying of Aid and the Aid and Trade Provision
• 10   Aid Volume
• 11   The Department: Managing Itself
• 12   Development Impact
• Notes and References
• Index