LONDON: Well-heeled consultants and companies in the west are the beneficiaries of a global aid system which results in less than 40 per cent in every pound helping to eradicate poverty in the developing world, according to a report released on Friday. Just over a month before Britain will make a doubling of aid a centrepiece of the Gleneagles summit, the charity ActionAid said the bulk of the money currently allocated was wasted, misdirected or recycled within rich countries. It found that 61 per cent of aid flows were “phantom” rather than “real” — rising to almost 90% in the case of France and the United States.

The report accused rich countries of “political grandstanding” and highlighted the ways in which they were disguising how real aid flows were even lower than they appeared to be. “Failure to target aid at the poorest countries, runaway spending on overpriced technical assistance from international consultants, tying aid to purchases from donor countries’ own firms, cumbersome and ill-coordinated planning, implementation, monitoring and reporting requirements, excessive administrative costs, late and partial disbursements, double counting of debt relief, and aid spending on immigration services all deflate the value of aid,” the charity said. Compared with a UN target of spending 0.7%, rich countries were ostensibly spending 0.25% of their national income on aid each year. The figure came down to 0.1% when “phantom” aid was stripped out.

The G7 countries — Britain, the US, Germany, Italy, France, Canada and Japan — spent only 0.07% of national income on real aid and would need a tenfold increase to hit the UN target, ActionAid said. Britain, according to the research, is one of the better performing countries, but still allows 29% of the money spent by the Department for International Development (DfID) to be squandered on “phantom” aid. The UK was spending 0.24% of gross domestic product on “real” aid in 2003.

The report quotes a DfID official as saying that foreign experts giving technical advice in Vietnam, for example, are paid $18,000-$27,000 (about £9,900 -£14,800) a month, compared with $1,500-$3,000 for local experts. DfID rejected the report’s findings.

“It’s simply nonsense to suggest that a third of UK aid is ‘phantom’,” said Hilary Benn, the international development secretary. “ActionAid’s figures just don’t stack up. It’s absurd to argue that debt relief, or practical advice from technical experts, isn’t real aid.” He did, however, accept that there was a need for more and better aid and said the UK was working with other donors to avoid duplication and waste.

ActionAid said the report did not invalidate the need for more financial assistance, saying that where aid was delivered it was helping to tackle poverty. It called for a new international agreement that would see money spent where it was needed rather than on business class flights for western consultants. It said three quarters of the money spent on technical assistance was wasted on inflated salaries for consultants flown in to advise poor countries.

The report adds: “Donors have signed up to numerous international agreements to improve the quality of their aid. Yet this agenda has made little headway. At the heart of this failure there lies a lack of accountability on the part of donors for either the amount of aid they commit, or the quality of that aid.” Donors, it said, continued to restrict the ability of developing countries “to plot their own development paths”. And the rich get richer...

AID BREAKDOWN: Just 11% of French aid is genuine, says Action Aid. France spends nearly $2bn on technical assistance and $0.5bn on refugee costs in France. Debt relief, an accounting exercise, is 40%