MPs warn on aid effectiveness

Not enough is being done to ascertain the value of direct aid given to developing countries, a report from MPs has claimed.

The Commons public accounts committee said on Tuesday that the Department for International Development (DfID) spent around a fifth of its aid budget on budget support - payments made directly to a developing country's central budget - but warned that this form of aid was particularly susceptible to corruption and called on ministers to do more to monitor the effectiveness of budget support.

In 2006-07, the department spent £461m on budget support to 13 countries and the report notes that it is now the preferred means of distributing aid because it reinforces "developing country policies and systems".

But because these systems are by definition weak, the committee said that DfID should seek to strengthen domestic accountability in partner countries to ensure UK funds are being used effectively.

The committee also said that DfID's system of monitoring for corruption and waste had "basic weaknesses", pointing out that risk assessments were carried out "subjectively, by country teams".

Committee chairman Edward Leigh (pictured) said: "Despite spending around one fifth of its bilateral aid in the form of direct payments to the governments of developing countries, the Department for International Development does not know how good an instrument this is in reducing poverty.

"Nor does the department know whether such support provides better value for money in reducing poverty than other forms of aid.

"Parliament must be able to come to an informed view on the balance of risk and reward.

"The countries who receive this financial support often do not have the monitoring systems to check that the funds have gone where they should. And, when UK funds are paid directly to developing countries' national systems, the risks of leakage and corruption are often particularly high.

"DFID must give more attention to building accountability within developing countries and to supporting the parliamentary and audit bodies in those countries who can challenge the use of public resources by the ruling party."