THE BLOG

Justine Greening: Don't Put the Interests of British Business Before Those of the Poor

19/03/2013 13:26 GMT | Updated 18/05/2013 10:12 BST

In a speech on 18 March to the London Stock Exchange, international development secretary Justine Greening said the UK wants to make it easier for British businesses to get a slice of the aid budget. This sends a worrying signal that the government is putting the interests of the private sector ahead of the interests of the poor.

The private sector is critical to the economic fortunes of poor countries. Multinational businesses (whether British or not) indeed do have an important role to play contributing to equitable, sustainable economic development across the globe. That role is to act responsibly, trade and invest ethically, pay taxes fairly and openly, and respect workers' rights.

Their role is not to be the beneficiaries of aid. The point of aid is poverty reduction - a purpose that is written into UK law.

It has been British development policy for more than a decade to avoid 'tied aid,' which is the dubious practice of granting development contracts to a donor country's own businesses - in order to promote that country's commercial and political interests. Tied aid is widely discredited, causing costly development failures through putting the interests of the private sector before those of the poor.

In the UK the previous government banned the practice of tied aid in 1997, in part a response to the notorious Pergau dam project in Malaysia where millions of pounds of aid money had been linked to arms deals. In another example, British contractors were used to provide water supplies in Nepal in the 1990s, but the project was left unfinished after massive time and cost overruns.

Despite this latest announcement being greeted triumphantly by the Daily Mail, who think the government has finally 'seen sense' on tied aid, international development secretary Justine Greening has denied that is what she is suggesting. She has acknowledged that tied aid is 'the wrong way to go about things'. But if that's the case, how exactly does the government intend to increase the role of British businesses in development?

Yes, businesses should be encouraged to trade fairly and act responsibly abroad. But any measures by DFID to promote particular British companies in poorer countries smacks of thinly veiled protectionism at best - and at worst the prioritisation of UK plc over and above the rights and needs of the poorest people in the world.

Greening believes part of the solution lies with CDC group, an organisation that is part of DFID (formerly known as the Commonwealth Development Corporation). In 2011 CDC went through a shake up after widespread criticism of executive pay and accusations it was focused more on maximising profit than on relieving poverty. Thankfully, she didn't go so far as to include UK Export Finance, the shady government department that backs loans for UK exports, which has largely steered clear of the poorest countries in recent years - and must surely be one to watch.

In reality, even without explicitly tying aid, the UK already manages to create plenty of opportunities for British business to do very well out of the aid budget. According to a recent Guardian investigation, of the 117 major DFID contracts published on the government's portal since January 2011, only nine include non-UK firms among the grantees. So this announcement seems to herald much more of the same.

Supporters of the government's move will no doubt argue that the two sets of interests are mutually beneficial. They will say that to help our businesses abroad is to help global growth, which in turn will reduce poverty. But - aside from the widely discredited nature of this 'trickle down' economics - there's a crucial missing word in the government's analysis of development, which is inequality.

Since 2000 when the Millennium Development Goals were launched, many types of inequality have worsened, for example between the richest and poorest people in countries like China and India. Inequality is the issue that goes to the heart of eliminating poverty. It's the one governments so rarely want to tackle, but it's the one that is absolutely crucial if the rights of the world's poorest and most marginalised people are ever going to be recognised - and simply promoting growth without ensuring it is done sustainably and inclusively will only deepen inequality. Focusing on reducing inequality, not promotion of UK businesses overseas, is the key to ending poverty.

There was though a positive note to Greening's speech - the announcement of the creation of a Tax Capability Building Unit. This is to help countries build their own tax base and is very welcome. To end dependence on external finance, it is crucial that countries are able to collect taxes more effectively, ensuring that all companies operating there (and individuals too) pay their fair share. DFID should concentrate on these sorts of measures, supporting developing countries to support themselves, rather than looking for ways to give British businesses an even bigger piece of the pie.