HC Deb 06 November 2003 vol 412 cc41-3WS
The Secretary of State for International Development (Hilary Benn)

I have previously indicated that changes would be made to planned future programme allocations for middle-income countries over the next two years. This results from decisions taken on financing for Iraq and the Government's commitment to increase the proportion of our direct assistance going to the poorest countries.

As reported in the Department's 2003 Annual Report, we are planning to increase significantly total bilateral allocations for DFID's country and regional programmes over the next two years from this year's estimated total of £1.429 billion to £1.762 billion in 2004–05 and £2.078 billion in 2005–06. This includes meeting the Prime Minister's commitment to increase our spending for Africa to £1 billion annually by 2005–06 and increasing our spending in Asia by some 45 per cent. to nearly £800 million by the same year.Overall, the UK's aid budget will grow to nearly £4.6 billion by 2005–06, an average annual increase over the 2002 spending review period of 8.1 per cent. in real terms. The UK's level of Official Development Assistance is set to reach 0.4 per cent. of national income by 2005–06—a 93 per cent. increase in real terms since 1997. This is evidence of this Government's continued commitment to make progress towards meeting the UN target of an ODA/GNI ratio of 0.7 per cent.

As set out in the 2003 Departmental report, responding to changes in circumstances is an integral part of DFID's work, and financial allocations for future years are subject to change. We had already planned to reduce the overall allocation to middle-income countries in order to allow an increase in spending on the poorest countries.

Over the next two years, funding for the reconstruction of Iraq includes £50 million reallocated from planned programmes, together with DFID contingency funding of £115 million and contributions from other Government Departments. Our Public Service Agreement includes the commitment to increase the share of our bilateral programme going to low-income countries to 90 per cent. by 2005–06 As a consequence of the temporary increase in funding for Iraq, which we expect to return to middle-income status soon, we will also need to move a further estimated £ 50 million from middle-income country programmes to low-income country programmes. This is in line with our commitment to the 90 per cent. target.

The total effect of these changes will be a reduction in planned bilateral spending in middle-income countries in 2004–05 and 2005–06 of around £100 million. Funding for programmes in middle-income countries during the current financial year will not be affected. Our budget for humanitarian activities will remain as planned.

We will continue to provide substantial support to middle-income countries through our contributions to multilateral institutions. In 2001–02 this amounted to some £600 million, of which some £350 million was for middle-income developing countries; and the rest was for middle-income countries in transition.

These changes in planned bilateral allocations will involve withdrawal from programmes, earlier than we had previously decided, from a number of middle-income countries, which are less dependent on UK bilateral aid. Romania, Bulgaria, Croatia, and Egypt are in this category. Our planned programme in Jordan will be re-phased.Our current programmes in Anguilla and TCI will now close in 2004–05, a year earlier than originally planned.

We will be continuing with our bilateral programmes, with some reduction in spending levels and in some cases an adjustment of focus in the following countries/ regions: South Africa, China, Sri Lanka, Russia, Jamaica, Guyana, Brazil, Bolivia, Serbia and Montenegro, Bosnia, Albania, Kosovo and the Caribbean. Our small programme in the former Yugoslav Republic of Macedonia will close by 2005–06, as will the small programmes in Peru and Honduras. We will be developing a new approach to regional involvement in Latin America. Our programmes in the Palestinian Authority, Montserrat and St Helena will remain unaffected; and we will retain a programme in Nicaragua.

I also propose to increase, from 2005–06,our partnership funding for NGOs, including those working with middle-income countries and Latin America.

My officials are in touch with all of the countries affected by these changes in plans. We are also talking to the multilateral agencies and some other bilateral donors about the scope for increasing our cooperation with them. This will be reflected in the new middle-income country strategy that the Department is preparing in consultation with other Departments in Whitehall. I shall report further to the House on the impact on individual country programmes once these discussions are complete.