Canada Balancing Budget on Backs of World’s Poorest

This piece originally appeared as a guest post on the McLeod Group’s blog: http://www.mcleodgroup.ca/2015/04/21/canada-balancing-budget-on-backs-of-worlds-poorest/

The latest foreign aid numbers were released on April 8. Globally, aid remains at near record high levels (US$135 billion). This is good news for the global fight against poverty. The numbers tell a rather depressing story, however, if you are Canadian. In the past two years, Canada’s aid to the world’s poorer countries has declined by over US$1 billion, a more than 20% decrease since 2012. This sharp decline is among the largest of all the wealthy donor countries and comes in a year when Canada’s government had already committed in its 2014 budget to hold its aid commitments steady.

Broken budget promises are not new, but in further cutting Canadian foreign aid, the Harper government is literally looking to balance the budget on the backs of the world’s poorest. Lapsed spending in previous years, combined with two years cuts of more than 10%, means that Canada’s real dollar aid spending is at its lowest levels since 2005. These declines are explained by the OECD as being: “due to the timing of certain contributions to international organizations and planned cuts in aid as budget saving measures.”

It is these “budget saving measures” that are enabling the Harper government to shirk Canada’s international responsibilities to fight poverty in order to balance the newly released 2015 budget and fund Conservative party election promises, such as the controversial income-splitting tax policy. With an estimated cost of $2.2 billion, the income-splitting program is expected to benefit only 15% of Canadian households and disproportionately aid middle- and high-income earners. In this respect, nearly half the cost of Harper’s income-splitting policy can be seen to be funded by cuts to Canada’s foreign aid.

Some will respond to this assessment by saying that it does not matter how much aid we spend as long as we spend it well. Indeed, Bill Gates’ whirlwind visit to Ottawa in February saw Canada lauded for its leadership of recent global efforts to promote maternal and child health through its aid program. Canada and the Prime Minister personally have garnered recent acclaim for these efforts, but at the same time Canada should be called out for its flagging overall commitment to international development.

Canada has never seriously pursued the UN’s aid target of 0.7% of gross national income. The fact that 2014 tally indicates Canada spent only 0.24% of GNI on aid is testament to this failing. Further, Canada continues to fall short of the secondary target of providing 0.15% of GNI to the world’s poorest countries (Least-Developed Countries). Many would argue that committing to arbitrary global targets such as these, especially in lean economic times, makes little sense. Yet, the United Kingdom has done exactly that. In an era of British austerity, the Cameron government committed to sharp increases in UK aid spending and indeed recently passed legislation making it mandatory for future governments to spend to at least 0.7% of GNI on aid. This is what political will to support global development looks like. In Canada, we instead see paper thin political will intended to score easy points by championing one global development challenge at the same time as drastically cutting our already miserly aid commitments.

The new Federal budget, released on April 21, paid little attention to aid levels. Instead, much is being made by the Harper government of its shrewd economic management to arrive at a balanced budget and to deliver on election promises like income splitting.

Canadians should have no illusions about how we will have arrived at that point: The budget has been balanced, at least in part, on the backs of the world’s poorest. Balanced budgets and boutique tax-cuts like income splitting might help win votes for the Conservative party and put money in the pockets of some of Canada’s wealthier households, but at a steep price when it comes to Canada’s foreign aid commitments and reputation. We should all ask if this is a price we are willing to keep paying: Is a balanced budget at the expense of Canada doing its part in addressing key global challenges in our longer-term self-interest? Surely not. Canadians deserve generous and visionary commitment to global development that safeguards these interests. Instead, we get penny-pinching and shortsighted political opportunism at the expense of continued global poverty and inequality.

CIDA’s Unspent Money

In January, Canada’s Minister for International Cooperation, Julian Fantino, made waves in the press by suggesting that there was a de facto freeze on new aid to Haiti. He then proceeded to justify this freeze by suggesting that Canadians had a ‘right’ to demand better development results out of the poorest country in the Western Hemisphere. As Haiti’s second largest aid donor after the United States, this indeed came as a shock to not only the Canadian aid community, but also to the Haitian government and diplomats who deal with CIDA as the main channel of Canadian support for the country.

While much was made of Minister Fantino’s cavalier assessment of Haiti and its ongoing problems despite the presence of copious amounts of aid, less attention was paid to the possible implications of this sort of freeze for Canadian aid more broadly.   In particular, no one seemed to question what a freeze on one of Canada’s largest aid programs means for Canada’s overall aid spending – a question made even more pressing this year given the cuts to Canada’s aid programs announced in the May 2012 budget.

As a former CIDA official, I can speak from experience that in the March run-up to the end of fiscal year at the Agency is a frantic period of trying to spend funds which have yet to be disbursed lest they go unspent and are lost to the aid budget altogether.  It is with particular interest, then, that I noted a report by Lee Berthiaume that cited a number of Canadian aid experts expressing surprise at CIDA lapsing “as much as $800 million” in unspent funds in the past year.  These funds, instead of funding Canadian efforts to support development globally, were returned to the government’s general coffers.

To contextualize what lapsing that amount of money means to an organization like CIDA, we only need to consider that in its 2011-2012 Report to Parliament, CIDAclaimed it spent just over $3.9 billion.  If reports of it lapsing $800 are confirmed, then this implies a more than 20 percent reduction in aid spending by CIDA in 2012-2013.

Cuts to Canadian aid were expected.  The 2012 federal budget called for a 7.5 percent reduction in aid spending.  Some of this has already been planned for through the restructuring of CIDA’s workforce and the announced closure of bilateral aid programs to partner countries, including China, Cambodia, Malawi, Nepal, Niger, Rwanda, Zambia and Zimbabwe.  Regardless of the wisdom of these cuts, there appears at least to be a plan for how they will be conducted.

In contrast, the news that CIDA is again lapsing hundreds of millions – if not more – in Canadian aid money is more shocking.  What this arguably suggests is the adoption of a willful cutting through inaction.  The freeze on aid to Haiti is only one example.  An anonymous former CIDA colleague of mine put it bluntly and suggested that several programs were indeed frozen in the same manner as Haiti, calling the Haiti freeze only the “tip of the iceberg.”  Indeed, the official stated that as of early January 2013 Pakistan had been without a country strategy for going on two years, and therefore had seen no new bilateral project approvals in that time. Between January and the end of March, a single new project to support elections in Pakistan was approved – the first in two years.  Other countries had been treated similarly.  Still, requests for much-needed support – even those in line with CIDA priorities like maternal, newborn, and child health – pile up awaiting ministerial approval. Arguing that this suits the government of the day perfectly as their top priority is deficit reduction rather than aid, my former colleague paints a bleak picture of the priorities of the leadership within Canada’s aid agency.  Through even the informal freezing of these programs, CIDA is wilfully under-spending its precious aid budget in some of the most complex and deserving of its recipient partner countries.

Ian Smillie, quoted in the Berthiaume article calls this “cutting by other means,” but what it truly reflects is cutting through inaction.  If Minister Fantino chooses not to approve strategies for these and other countries it creates the conditions in which he can easily justify not allocating new funds.  His insistence that new spending be “focused on results” and “not shovelling money out the door” is common sense. Yet, if CIDA – or whatever it will resemble in its new incarnation after the merger with DFAIT – is not able to work within the context of country strategies for key partners then we will find ourselves back at this point again next year with even more unspent aid money – money which can be put to best use creating jobs, immunizing children, or promoting women’s rights.

Recent analysis on this blog by Fraser Reilly-King points to some of the long-term trends in Canadian aid.  With this repeated lapsing of aid funds and the likely chaos associated with the pending CIDA-DFAIT marriage, the ability of a government which appears to hold less and less esteem for keeping up Canada’s commitments to the developing world to continue to cut through inaction will increase.

Without increased scrutiny by the Canadian public, aid community, and partner countries, Minister Fantino’s desk will continue to pile up with memos and country strategies while the Treasury Board harvests unspent CIDA funds to help shore up Tory efforts to shrink the deficit.  If the government wishes to further reduce Canadian aid funding, then they should do it through and open, accountable, publicly and politically debated approach rather than this secretive cutting through inaction.

This post originally appeared in the Ottawa Citizen Aid & Development Blog on 2013/04/30.