International Development Act 2002: An Overview

1. The International Development Act 2002 ("2002 Act") will come into effect on 17 June 2002, replacing the Overseas Development and Cooperation Act 1980 ("1980 Act"). This note explains the contents of the 2002 Act and how it affects DFID staff. More detailed guidance is provided in Frequently Asked Questions

Why is an Act needed at all?

2. Ministers can only spend public money for the purposes, and in the manner, authorised by Parliament. Where types of expenditure are made on a recurring basis it is customary for authority for these to be given in specific legislation.

What the 2002 Act Covers

3. The 2002 Act will be the legal authority for most DFID expenditure. The two major exceptions will be all UK contributions to European Community assistance (other than contributions to the European Development Fund) and overseas pensions - which are both covered by separate Acts. 

Why We Have a New Act

4. The Government committed itself to considering a new Act in the 1997 White Paper Eliminating World Poverty. The idea received support from the development community during Development Policy Forums in 1998 and 1999. It was felt that the existing legislation (the 1980 Act) did not reflect DFID’s focus on poverty reduction and lay DFID open to pressures to give assistance for other purposes such as the policy of tying UK aid to British goods and services. It also meant that DFID was limited in the ways we could support private sector activity and had no specific authority to promote development awareness.

The Key Parts

5. The 2002 Act sets out more clearly the purposes for which development aid can be given and increases the number of ways in which it can be provided.

The Powers

6. The 2002 Act gives the authority to spend money through a number of different "powers". The most significant is the:

Provision of development assistance which contributes to poverty reduction (the so-called "core" power)

7. The Act also enables the:

Provision of development assistance to the UK Overseas Territories

Provision of humanitarian assistance

Contributions to Multilateral Development Banks

8. Supplementary powers are provided to assist in achieving the purposes of the Act. These include a power to support organisations or funds that contribute to international development.

The "Core Power"

9. The 2002 Act establishes poverty reduction as the over-arching purpose of British development assistance, either by furthering sustainable development or promoting the welfare of people (Section 1 of the 2002 Act).

"The Secretary of State may provide any person or body with development assistance if he is satisfied that the provision of the assistance is likely to contribute to a reduction in poverty.

In this Act "development assistance" means assistance provided for the purpose of furthering sustainable development..., or improving the welfare of the population...(Section 1 (1) - (2)). In other words, two conditions need to be met, that a) assistance is provided for the purpose of furthering sustainable development or improving welfare, and b) that DFID is satisfied that the assistance will be likely to contribute to the reduction of poverty. To meet one of these conditions alone would not be enough. To meet the purpose test without being likely to contribute to poverty reduction would be to allow expenditure on schemes designed with good intentions regardless of their chance of having any impact. To have an impact on poverty without meeting the purpose test would be to allow policies, such as Aid Tying, which are pursued for non-developmental reasons.

10. The term "sustainable development" is clarified to prevent interpretations that have just an environmental or economic meaning:

"... sustainable development includes any development that is, in the opinion of the Secretary of State, prudent having regard to the likelihood of its generating lasting benefits for the population of the country...in relation to which it is provided." (Section 1(3))

11. The 1980 Act was open to broad interpretation. It allowed the Secretary of State to provide assistance with the purpose of “promoting the development or maintaining the economy of a country or territory outside the United Kingdom, or the welfare of its people” This did not clearly set poverty reduction and development as the core objectives of the aid.

12. The 2002 Act is drafted in such a way that a policy such as Tied Aid (and the Aid and Trade Provision), in which assistance is given for the purpose of promoting UK trade or for other commercial or political reasons, would now be challengeable in the courts.

The Overseas Territory Power

13. Development assistance to the UK Overseas Territories must seek to further sustainable development or promote the welfare of its people but is not subject to the over-arching requirement of contributing to the reduction of poverty (Section 2 of the 2002 Act). This is in recognition of the continuing special relationship between the UK and Overseas Territories 

The Humanitarian Power

14. A specific power has been given to enable the Secretary of State to provide assistance in time of disaster (Section 3 of the 2002 Act). The power is limited to assistance for the purpose of alleviating the effects of disasters, man-made or natural, or other emergencies, on the people of the country or territory concerned. This power is not subject to the requirement that it be given for the purpose of furthering sustainable development or promoting welfare, nor that it contribute to the reduction of poverty. Longer term assistance would have to be justified under the core power

Contributions to Multilateral Development Banks

15. As in the 1980 Act, a specific power is given to make contributions to Multilateral Development Banks such as the World Bank (Section 11 of the 2002 Act).

New Ways of Providing Development Assistance

16. The 2002 Act increases the number of ways in which development assistance can be provided (subject to the assistance being provided for the purpose of furthering sustainable development or promoting welfare and likely to contribute to the reduction of poverty):

It enables the Secretary of State to provide not only grants or loans but also to give guarantees and purchase equities (or other company securities) (Section 6 of the 2002 Act). Specific guidance on the use of these new instruments and their use will issue shortly.

It gives explicit power to support development awareness work (section 4(2)(c)).

What Difference Does The Act Make in Practice?

17. The Act essentially reflects changes that have already occurred in UK development policy since 1997. Projects and programmes are already designed with the principal purpose of contributing to poverty reduction. The difference is that these changes are now reflected in law. The Act means that we should approve every development assistance project or programme explicitly on the basis that it is provided for the purpose of either furthering sustainable development or promoting the welfare of people and that it is likely to contribute to the reduction of poverty. The only exceptions are assistance to UK Overseas Territories, humanitarian assistance, and contributions to Multilateral Development Banks (see paragraphs 13-15 above).

The full text of the Act is available from HMSO