Beyond Brexit: The Volume of EU Aid after 2020

While the UK negotiates its exit from the EU, the EU will be negotiating over its own budget for the period from 2020-2026 as part of the Multi-Annual Financial Framework. So, where will EU development aid be a quarter of the way through the 21^st century?

The EU rightly lauds its member states as “the world’s leading aid donor,” accounting for over half of global aid. Even after the UK leaves and takes its £1.3bn development spend with it, the EU’s claim will still hold. But this overall headline masks a more mixed performance.

The EU has publicly recognised that its members failed to meet their 2015 commitment to give 0.7 percent of Gross National Income (GNI) to development. The EU notes “the economic crisis and severe budgetary pressures in most EU Member States meant that the EU did not meet this ambitious target in 2015.” The latest (provisional 2015) figure for the EU is 0.47 percent of GNI; countries divide up as below:

The financial crisis clearly triggered in-built counter-cyclical spending in EU member states and made increases in Overseas Development Assistance (ODA) difficult on a practical budget level. Still, the financial crisis was eight years ago, the Greek debt crisis is in abeyance, and the European Commission expects steady if unspectacular economic growth of 1.6 percent in 2017 and 1.8 percent in 2018. Longer-term estimates (like those from USDA) see EU (less the UK) output in 2026 being 17 percent higher in real terms than in 2016. Giving up just 1 of that 17 percent for development would smash the target—taking ODA to some 1.2 percent of GNI in 2026. This undermines the argument that hitting 0.7 percent of GNI is fiscally impossible. The target is fiscally possible over time, and few leaders have wanted to openly reject the target, even if few have taken decisive action to move toward it.

So, what progress should the EU aim for on aid volumes by 2026?

The EU faces ongoing policy challenges around the Euro, migration, security, and a simpler, more affordable agriculture policy (which, at €60bn in 2017 will still account for almost 40 percent of the budget).

For most EU member states, the national share of Brussels spending on ODA is a significant determinant of their national ODA levels. So the EU budget allocation for ODA is important. Recent regional pressures on migration have pushed up ODA, with the 2017 budget allocation reaching an extra €735 million over the MFF projections. This was a victory for campaigning groups such as ONE, but can the trajectory be sustained? After Brexit budget decisions will be taken without the UK—traditionally one of the strongest advocates for higher ODA levels in the EU budget.

However, EU leaders have shown leadership in making commitments to invest in the world. Last May, the European Council (i.e. the heads of member states) reaffirmed its commitment to reach this target “within the time-frame of the post-2015 agenda”—that is, by 2030. EU members will therefore need to make substantial progress in the period to 2026. Drawing a straight line from its current ODA spend to that commitment in 2030 would mean EU ODA of 0.64 percent in 2026. This would raise the EU’s collective aid contribution by some €25bn, to almost €75bn Euros per year (based on current EU GNI levels but excluding the UK).

Alongside the overall approach to aid volume, the EU will also need to consider related issues like how to revise the Cotonou Agreement (which covers the EU’s relationship with 79 countries from Africa, the Caribbean and the Pacific) including whether to bring the European Development Fund into the EU budget (and therefore compulsory) rather than as part of Cotonou as now.

How would additional aid funding be spent?

An extra €25bn annual on development could achieve massive impact on development. Whilst EU members fund development projects directly, the European Commission has well-established channels for spending this money, and those channels are more effective than most casual critics contend. EU institutions scored well in DFID’s recent aid review, and in Brookings and CGD’s Quality of ODA scoring. Unlike most multilateral agencies, the EU is able to combine aid with trade, diplomacy, and security support. The EU External Action Service should be ideally situated to deliver coordinated aid through 'joint programming,’ especially since developing countries are crying foul on the failure of donor countries to deliver their harmonisation commitments under the 2005 Paris Declaration.

Still, the Commission will need to think about how it can ensure that additional aid is spent effectively, with a stronger focus on results and minimal bureaucratic knots. Most of all, Brussels will need to show that aid can be spent visibly, in a way that enables member states to show they are addressing tangible global problems, rather than just pouring tax-payer money into an EU institution. We will be exploring such opportunities in the coming months.

In conclusion then, the UK’s departure from the EU will create a short-term financing pressure on the EU institution aid programmes—but EU leaders’ commitments in the next financial period could lead to substantial extra resources for development if promises are kept.