'Serious risks' involved in UK's Prosperity Fund - report

The amount of UK government aid money going to some richer developing countries should be restricted, an independent watchdog has said.

The Independent Commission for Aid Impact (ICAI) warned of "serious risks" about the effectiveness of a £1.3bn project to help developing countries.

The Prosperity Fund is "fragmented" and lacks transparency, a report said.

A government spokesman said the fund only supported programmes to reduce poverty and delivered value for money.

The Prosperity Fund was set up to reduce poverty and create overseas business opportunities for the UK, particularly in countries such as China, India, Mexico, Indonesia and Brazil.

It has a budget of £1.3bn over five years and is part of the government's commitment to spending 0.7% of gross domestic product on aid.

'Serious risks'

The fund is yet to implement any major programmes.

However, a highly critical report said it faces challenges in meeting the aims.

Few details of where the money will go have been publicly released and there has been limited scrutiny of the scheme, it said.

Outline bids for money - known as concept notes - contained "limited detail" as to how objectives will be achieved, the report added.

"Given the speed at which participating departments are expected to move from concept notes through to full business cases and implementation at scale, the lack of delivery capacity in key departments and diplomatic posts presents some serious risks," it said.

Analysis

By James Landale, BBC diplomatic correspondent

The Prosperity Fund was set up two years ago to help departments like the Foreign Office provide British aid in a new way.

Its aim was not just to reduce poverty but also help build markets for British firms overseas. So it was given a budget of £1.3bn to spend over five years in countries like India, China and Brazil.

But the Independent Commission for Aid Impact, which monitors aid spending, says the fund's work is "fragmented", it lacks transparency, there are "conflict of interest concerns" and "significant risks" about value for money and delivery.

It also questions whether the fund breaks rules about what is and what is not overseas development assistance.

As such, the watchdog says the government must hold back some of the spending to make sure it is being used wisely.

Alison Evans, ICAI's chief commissioner, said the Prosperity Fund was "a complex and ambitious initiative", adding that it has made "significant progress" in a short space of time

However, she said: "To deliver on its aims it must continue to improve its systems and processes, particularly given the risks associated with its current speed of delivery.

"We therefore recommend the government reviews the current spending plans to ensure the amount of UK aid spent matches the Prosperity Fund's capacity to deliver the results for people in developing countries, and for business."

A government spokesman said it was already implementing the vast majority of ICAI's early recommendations, including on transparency

"Sustained economic growth is the only long term solution to poverty and the Prosperity Fund supports the vital economic development needed to help middle-income countries, where more than 60% of the world's poorest live, to stand on their own two feet and become our trading partners of the future."