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1. The Fund
The Fund was announced as part of the 2015 Strategic Defence and Security Review. It supports the United Nations Sustainable Development Goals (SDGs) as well as the 2015 UK Aid Strategy by promoting growth and prosperity in developing countries.
Many of the developing middle-income countries on which the Fund focuses still face considerable challenges such as rapid urbanisation, climate change and high and persistent inequality (including gender inequality) which can lower long-term growth prospects. The Prosperity Fund supports the broad-based and inclusive growth needed for poverty reduction.
The primary purpose of the Prosperity Fund is to contribute to the Sustainable Development Goals, agreed at the UN in 2015, through addressing barriers to growth. It does this through improving the global business environment, strengthening institutions, and encouraging greater global private investment. The Fund is particularly relevant to SDG 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.
As well as contributing to inclusive growth in recipient countries, we expect the reforms brought about by the programmes to create opportunities for international business including UK companies. At the direction of a ministerial board, UK government departments have developed multi-year programmes in potential high impact sectors and countries.
2. Why global prosperity matters to the UK
Inclusive economic growth is the only way to sustainably lift countries out of poverty. The UK Aid Strategy (2015) sets out how promoting growth and prosperity in developing countries not only contributes to poverty reduction, but also strengthens economic opportunities for the rest of the world, including the UK. The Strategic Defence and Security Review 2015 also recognises that enabling and stabilising fast-growing, open and resilient economies is essential to our national security.
The countries in which the Fund operates present huge untapped potential; opportunities for sharing expertise, creating mutually beneficial partnerships and for businesses and trade to thrive. By breaking down barriers to growth, and supporting vital economic development and reform, the UK is helping countries build well regulated, competitive markets, and making our new trading partners of the future.
3. How we ensure value for money
A cross-government ministerial board, supported by a cross-government portfolio board gives strategic direction and manages the overall portfolio. Programmes under the Fund are approved and closely scrutinised by government departments in order to ensure they deliver impact and value for money.
Value for money is ensured through a highly competitive bidding process, rigorous contracting processes, regular assessment through annual reviews and Fund level monitoring and evaluation. All proposed programmes and projects are assessed against:
impact: how the programme supports the economic development and welfare of developing countries (ODA projects only) and how it creates opportunities for business, including UK business
strategic fit: does it meet the needs and priorities of the partner country and the steer from the National Security Council (NSC) Sub-Committee
value for money
4. How we measure Impact
The Fund has developed a ‘Theory of Change’ (see the 2017 to 2018 Annual Report to identify the key drivers of poverty reduction and ways in which the Prosperity Fund can help to address these. Five types of intervention have been identified:
- investment in infrastructure and human capital
- innovation and knowledge transfer, including low-carbon technology
- trade, financial and economic reform
- policy and regulatory capacity
- ease of doing business
The Theory of Change explains the journey from near-term inputs through to long-term poverty reduction. In-depth evaluations will review how programme activities have fed directly into intermediate outcomes. Beyond intermediate outcomes, economic theory will demonstrate that the Fund contributes positively to the UN Sustainable Development Goals (SDGs). At impact level the Fund is particularly focused on SDG 8: promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all, but supports others, including SDG 5: achieve gender equality and empower all women and girls.
The Theory of Change is reviewed periodically. For the current update please see the 2017 to 2018 Annual Report (link above).
5. Gender and Inclusion
The UK aid Strategy commits that throughout all its development spending the government will continue to prioritise the needs of girls and women and the most excluded people. A strong focus on gender and inclusion is essential for achieving the Prosperity Fund’s primary purpose of delivering inclusive growth and poverty reduction. Gender equality and women’s economic empowerment are key drivers of inclusive growth. It is estimated that $12 trillion could be added to the world economy by 2025 through greater female economic empowerment.
Prosperity Fund programmes tackle barriers to prosperity for women and excluded groups, taking opportunities for addressing gender and other inequalities by:
- ensuring compliance with the International Development (Gender Equality) Act: programmes must consider gender issues in their interventions. As a minimum, they must not exacerbate gender inequality, and are required to report annually on their performance
- identifying poor and excluded groups, such as rural women, youth, people with disabilities, and aspiring to be ambitious by promoting empowerment (building assets, capabilities and opportunities) and transformation (addressing systemic barriers to economic empowerment)
6. The Fund’s accountability
The cross-government Fund is accountable to the National Security Council (NSC) and overseen by a NSC Sub-Committee that sets the strategic direction of the Fund, to ensure the Fund meets NSC objectives. The Fund’s new Senior Responsible Owner is John Mahon (Director General, Exports for the Department for International Trade). The Fund is periodically reviewed by the Independent Commission for Aid Impact (ICAI) and answers to Parliament through the current Chancellor of the Duchy of Lancaster, Minister for the Cabinet Office, who also chairs the NSC Sub-Committee.
Spending departments receive delegated responsibility for delivering programmes and their impact, ensuring effective spend and delivery, value for money for the UK taxpayer and reporting on progress. They are also accountable for ensuring that spending meets Official Development Assistance (ODA) eligibility requirements and the legal requirements of the International Development Act and the International Development (Gender Equality) 2014. Departments are accountable to the cross-government NSC Sub-Committee for delivery and impact against NSC priorities when delivering Prosperity Fund programmes.
7. Prosperity Fund non-ODA spend
The Prosperity Fund includes a component of non-ODA (Official Development Assistance) funding worth £33 million from 2016 to 2020. Ministers have agreed that the Fund’s non-ODA spend should be used alongside Prosperity Fund ODA programmes and in support of the government’s post-EU exit trade policy ambition. Ministers have also agreed that any activity must be strategic and impactful, provide value for money, and complement the Department for International Trade’s work and wider government policies.