Banned aid: War-zone cash threat

Fragile and war-torn countries should lose British aid if their governments flout agreements, a committee of MPs will say today.

The International Development Committee said it was right to increase UK aid to states in a delicate position, highlighting the Democratic Republic of Congo and Rwanda.

The Department for International Development (DFID) is increasing its focus on fragile states and will spend 30 per cent of Official Development Assistance (ODA) – approximately £3.4 billion – in these states by 2015.

But in a report published today, the committee, chaired by Scottish Liberal Democrat Malcolm Bruce, has said aid must be conditional.

The call comes after independent analysis have warned the increased emphasis on offering cash to such fragile parts of the world increases the risk it falls into corrupt hands.

Mr Bruce said: “There are obvious benefits of providing aid to fragile states. It is, after all, cheaper to prevent conflicts, than to deal with wars and their aftermath.

“Nevertheless, there are considerable risks in spending aid money in conflict-scarred states and the government must be frank and open about this if it wants to convince the public that its approach is the right one, both morally and politically.

“In countries where fraud and corruption are rife, DFID will not always be able to mitigate against this adequately – especially where it sub-contracts delivery of its programmes to third parties.

“This means it may not be able to guarantee value for money for every pound it spends.”

The committee report urges the government to set out specific governance conditions as a requirement for the receipt of aid – and conditions under which aid will be withdrawn.

The report follows criticism of DFID. Independent watchdog, the Independent Commission for Aid Impact (ICAI) said its approach to fraud and corruption was “fragmented” and in need of “significant improvements”.

The report highlighted projects where DFID had out-sourced work to unaccountable third-party bodies and warned the focus on failed states put UK aid at risk of “higher levels of corruption”.

The DFID budget was one of two protected by the coalition following the last spending review in 2010, the other being health. The move has won praise from aid agencies, but drawn criticism from Tory backbenchers who have questioned why aid is being increased at a time of domestic cuts.

Ministers insist tighter restrictions are now in place. They point to the example of Malawi which had its UK aid cut earlier this year after UK diplomats accused president Bingu wa Mutharkia of mishandling the economy, and in 2009, expressed “disappointment” after he purchased his own luxury jet.

Andrew Mitchell, International Development Secretary, said: “This report says the coalition government is right to focus aid on fragile and conflict-affected states, to tackle crises before they begin.

“We make absolutely clear that transparency and good governance are vital, and we are prepared to withhold funding when our standards are not met, as we have done in Malawi.”

Max Lawson, head of public policy and advocacy for Oxfam, added: “The committee is right to raise the need to improve transparency and accountability. Aid to fragile states will always face challenges; some 40 per cent of the world’s poorest people live in these conflict ravaged states. It would be wrong of us to turn our backs on them.”