Direct aid should be the cornerstone of international development policy

That old argument has reared its ugly head this weekend, Conservative MPs wondering why we, at a time of austerity all-round, are still raising spending on international development aid. The argument usually centres on the fraud and corruption rife in developing nations and thus the poor record of getting aid to those for whom it is intended rather than going missing whilst the recipient country’s President sits back in the comfort of his new gold-plated and diamond encrusted throne. There is also the (very strong) argument that we are sending aid to nations who don’t need it – aid to China only stopped in 2010 and now the Government of India has admitted they had to be bullied into accepting aid from the UK.

Thanks to David Cameron joined Labour and Lib Dems in giving his party’s backing to raising aid in-line with the targets set out at the 2005 G8 summit, the Department for International Development (DfID) have been quietly getting on with their fantastic work whilst other departments are constantly in the press as they slash services and shed staff. Yet this cross-party consensus is allowing any discussion about efficiency of DfID’s work to be dominated by right-wing Tory backbenchers. Labour certainly shouldn’t call for a reduction in aid (I would cut up my membership card if they did) but its not right-wing to ask could this £9bn be spent more effectively, its just common sense to make sure money isn’t lost to corruption or wasted in bureaucracy but instead going straight to the front-line: the 1.7billion people worldwide living on just $1 a day.

The holy grail of international development is for aid to be no longer needed as countries utilise aid to develop their economy so that the nation becomes self-sufficient. Each nation is different in its needs depending on their stage of development, some need us to help eradicate widespread illnesses which decimate the workforce, some need help in getting every child into school to educate the future workforce and some need support to build infrastructure – trains, roads etc. to help their economy grow and to encourage foreign investment. All of such spending is vital but there is an emerging model for development that Governments around the world need to embrace – direct aid.

Direct Aid, the charity programme, is the lead proponent of the movement, basically people in developing countries are given mobile phones which can receive cash (donations) directly from Direct Aid, they then take this mobile phone to their nearest shop who transfer the money from the aid recipient’s phone into their store’s account and then give the aid recipient either credit or cash in return. DfID are already directing more cash to such schemes but such a transparent, accountable scheme getting cash directly to those most in need should be expanded, rapidly. We should dedicate 50% of all international development spending to direct aid and argue the case for every developed nation to do the same, contributing to a single UN-backed fund.

Half of the worldwide aid total is about $62bn, dedicating this sum to the 1.7bn living in absolute poverty would only secure $37.64 a year to these people – clearly not enough to raise them over the $1 a day threshold of $365 (around £231) a year however it would certainly lift many over or closer to the threshold. Private donors, often put off by the multitude of varying charities, would have a government-backed single international fund to contribute to. Governments such as the UK could let all taxpayers know how much of their annual total taxes paid has contributed towards the fund – improving transparency (and perhaps quashing some of the anti-aid debate) but in many cases encouraging people to top-up their statutory (tax) contribution with their own private donation. Doubling the fund with private donations would clearly life many millions more over the absolute poverty threshold.

This shouldn’t be where the buck stops. The point of these direct cash transfers is that they create demand in economies where there is none – the basic problem being the fundamental fact that the poor have no purchasing power. Any major policy shift towards mass direct cash transfers should be accompanied by negotiation with the government’s in developing countries about bilateral free trade agreements to first open up their markets without the disincentive of tariffs etc. and then negotiation between developed nation governments and their major corporations about how they can move into these markets to deliver goods to these newly expanded markets – for example supermarkets for the aid recipients to spend their cash in and, crucially banks to support entrepreneurs in the aid recipient nations to build their own retail/services businesses.

Getting the major supermarkets (as an example, many other service providers could move in) would lead not only to quality food for the masses with all the health benefits this would bring but also many thousands of jobs which help life people beyond ‘poverty plus a pound’ (as Nick Clegg) calls it, these people in work and businesses making profits would both lead to increased tax revenue for aid recipient nations to begin building up their own social security/welfare state safety nets for their poorest citizens and improving infrastructure to encourage further private sector investment.

David Cameron and all leading politicians should be praised for their continuing commitment to the world’s poorest people but all of us who believe in this moral imperative must make the public case for aid, the task would be a lot easier if we could improve transparency and guarantee cash is going straight to those who desperately need it.