The decision by the UK government at the end of 2020 to go back on its commitment to spend 0.7% of GDP on overseas development assistance – reducing it to 0.5% – has been widely criticised. First achieved in 2013, the UN target was embodied in UK law in 2015.
Of the 43 richer nations counted by the OECD as providing overseas development assistance (ODA) – defined as aid specifically aimed at reducing poverty in low-income countries – only five now provide 0.7% of GDP or more. The World Bank estimates that the Covid-19 crisis pushed around 120 million people around the world into extreme poverty, with almost all governments pushed into higher debt and their development plans severely retarded.
While many are calling for aid to low-income countries to be increased, others argue that the concept of aid from rich to poor nations is outdated, not least because the majority of the world’s poor no longer live in the lowest-income countries. Proponents of the concept of ‘Global Public Investment’ are attempting to forge a new multilateral approach to investing in the Sustainable Development Goals (SDGs) and ending poverty, opening up decision making to include the poor. Calls for a Global Green New Deal also embody this idea.
The UN’s 2020 Financing for Sustainable Development Report warns that global investment is insufficient to meet the Sustainable Development Goals and calls for a globally coordinated response to the Covid-19 crisis, focused on the countries most in need.
The International Expert Working Group on Global Public Investment (GPI) proposes five ‘paradigm shifts’ away from traditional top-down aid, including more representative decision making and rethinking international public finance as ‘an empowering multilateralism of a common fiscal endeavour’.
Overseas Development Institute research fellow Nilima Gulrajani examines how the Covid-19 pandemic challenges traditional notions of ‘aid’ and argues that Global Public Investment could embed a more reciprocal approach to development cooperation.
The UN trade and development organisation UNCTAD has called for a Global Green New Deal to further economic recovery and development towards the Sustainable Development Goals, with a coordinated global investment programme including both public and private finance.
Through the C40 climate leadership group, mayors of nearly 100 of the world’s leading cities have called for the resources and powers they need to drive a ‘green and just recovery’ from Covid-19 which could deliver transformative economic, health and climate benefits for urban populations.
It is now widely expected that the International Monetary Fund (IMF) will create $650 billion in new international money to help low-income countries recover out of the pandemic. So-called ‘Special Drawing Rights’ or SDRs (which countries can draw on from the IMF) could help support both vaccination and health care programmes and infrastructure investment – particularly in green projects and ‘nature-based solutions’ – in the global South.
Under current IMF rules SDRs mainly go to richer countries (including China), so this programme will require them to ‘donate’ their allocations back to the IMF to reallocate to poorer ones, particularly in Africa. Many people are now arguing that this redistribution should be written into the IMF’s rules to ensure it is permanent. Others are calling for a larger SDR issuance as part of stronger support for a global green and resilient recovery.
Explaining how the current allocation rules for SDRs provide very little for Africa, Hannah Wanjie Ryder and Gyude Moore propose that at least 25% of the new SDRs should be put into a special fund controlled by low-income countries and allocated on the basis of need (paywalled).
Lara Merling of the International Trade Union Confederation called upon the IMF to issue special drawing rights to “stave off a debt crisis in developing countries as well as ensure countries are able to afford items of vital importance such as personal protective equipment, vaccines, medicine, and food”.
The Center for Global Development explains how SDR rules could be changed so that the funds can be more effectively targeted to where they are most needed for development.
Eurodad argues that the proposed $650 billion issuance of SDRs is too small to properly support low-income and indebted countries, and argues for a $3 trillion package.
For many low-income countries, the Covid-19 crisis has further damaged already struggling economies. 52 countries are currently experiencing a debt crisis, where the size of debt payments undermines the government’s ability to protect the basic economic and social rights of its citizens. A further 100 plus countries are considered at risk. 2020 saw a huge flight of overseas capital from developing economies.
Since May 2020 the Debt Service Suspension Initiative (DSSI), initiated by the rich G20 countries, with the World Bank and IMF, has postponed debt repayments for some of the poorest countries during the pandemic. Many indebted countries are however choosing not to take part, for fear of this impacting on their sovereign credit rating and therefore the costs of future debt.
There are now widespread calls for a more comprehensive package of debt relief for the poorest and most indebted countries. One possibility is that this could be funded by earmarking the rise in the value of gold reserves over recent years. Innovative proposals have also been put forward to combine debt relief with environmental action, where countries agree to ‘swap’ debt relief for quantifiable commitments to reduce deforestation or enhance conservation.
Eurodad (the European Network on Debt and Development) criticises the G20’s Covid debt relief package (the DSSI) for its limited impact and failure to get multilateral and private lenders to participate.
Looking back at previous debt relief programmes, the Overseas Development Institute argues that imposing strict spending conditions on debt postponement, is too complex to monitor and erodes trust between countries, and proposes a more flexible approach.
The Jubilee Debt Campaign (JDC) summarised the key problems with the current debt package: too many nations are excluded from the Common Framework for solving unsustainable debt burdens and the Framework fails to include private creditors. The JDC calculates that African countries spend three times more on debt repayments to banks and speculators than it would cost to vaccinate the entire continent against Covid-19, with private creditors alone receiving $23.4bn in debt repayments this year.
Carbon Brief explain how China and other countries with high levels of overseas investment could help low-income nations tackle environmental degradation and climate change through ‘debt-for-nature’ swaps.
The Heinrich Böll Foundation shows how debt-for-climate swaps could be a ‘triple-win’ instrument, tackling the climate crisis through the protection of precious terrestrial and marine ecosystems, while also contributing to debt relief and economic recovery.
One of the most insistent criticisms of trade agreements has been in relation to their impacts on the environment. International trade is of its nature carbon-generating, as goods are transported around the world. But trade agreements can also open up new markets for commodities produced in unsustainable ways, from fish to palm oil, tropical timber to cement.
Many people therefore argue that environmental protection should be a core principle of trade agreements. Indeed, trade deals could be a powerful mechanism to promote stronger commitments on climate change or biodiversity conservation, rather than weaker ones.
One proposal gaining increased attention is for ‘border carbon adjustment’. This would enable countries with strong climate policies to impose tariffs on imports of goods from countries with lower standards. This would ensure that trade did not become a ‘race to the bottom’ in which lower standards were effectively incentivised. But many developing countries are worried that any such border tax could simply turn into a form of trade protectionism which froze them out of developed country markets.
The UK Trade Policy Observatory has set out how UK trade and climate policy need to be brought together if trade agreements are to contribute to the UK’s climate objectives.
Common Wealth proposes a series of measures to put trade policy at the service of delivering climate justice, as part of a Green New Deal.
A report from the International Energy Agency found the mineral supplies for electric cars “must increase 30-fold” to meet global climate targets. Carbon Brief summarised the report to communicate the scale of the challenge ahead and what needs to be done to prevent a mineral ‘bottleneck’ stifling the clean energy transition.
The Centre for European Reform’s Sam Lowe explains how an EU border carbon adjustment policy might work, and its benefits and costs.
Emerging economies expressed a ‘grace concern’ over the EU’s plans for a carbon border tax, which supporters argue is necessary to avoid carbon leakage but critics argue amounts to “protectionism disguised as climate action which will damage the economies of countries poorer than the EU”.
As the UK embarks on agreeing new trade agreements, there are increasing calls for such deals to be designed around clear principles of public interest, not simply on increasing the volume of trade as an end in itself. Many for example argue that trade deals should be used to protect and enhance labour and environmental standards, rather than to reduce them.
With the final Brexit deal rushed through Parliament at the last minute, there have been calls for MPs to have a much stronger scrutiny role in future, and for trade unions to be involved in agreement design where labour standards are at stake. More widely there are calls for the World Trade Organisation to be reformed to focus on major global challenges and greater accountability.
The Trade Justice Movement has drawn up model UK-EU trade and regulation agreements. These prioritise social and environmental goals and protect public services, thus preserving jobs and trade flows while retaining national flexibility for the UK to make its own rules.
The European Trade Union Congress has set out the principles of a progressive trade and investment policy for the EU, which puts trade agreements at the service of decent employment, social cohesion, equality and sustainable development.
A University of Warwick study recommends that the UK’s post-Brexit deals should aim to ‘protect, promote and empower’ workers, given them a proper voice in shaping deals which will affect them.
Anna Sands and Emily Jones argue for greater parliamentary scrutiny of trade deals, suggesting that this would result in negotiators having a stronger mandate in talks.
Leaving the EU means the UK needs to negotiate many new trade agreements – indeed the freedom to do so was one of the main arguments used in favour of Brexit.
Trade deals are no longer only, or even mainly, about reducing tariffs. They primarily focus now on reducing other ‘barriers to trade’, for example by aligning national regulations in areas such as product standards, professional qualifications and environmental protections.
Trade deal proposals are therefore often highly controversial, with many fearing they will lead to a lowering of existing standards and protections. The UK’s early discussions with the US around a post-Brexit deal were a case in point, with warnings that it would lead to the arrival of chlorinated chicken on UK shelves or the risk of further privatisation in the NHS.
One of the elements of trade agreements which has led to particular opposition is the widespread use of ‘Investor-State Dispute Settlement’ (ISDS). This is a mechanism under which a company from one signatory state investing in another can argue that new laws or regulations could negatively affect its expected profits or investment potential, and seek compensation in a binding (and often secret) arbitration tribunal. This effectively elevates the rights of corporations above a country’s democratic right to decide its own laws.
Economist Dani Rodrick shows how recent developments in trade agreements have focused on national regulations, intellectual property and labour and environmental laws. He argues for a new global trade paradigm that prioritises national prosperity and ‘peaceful economic coexistence’ between nations.
The Trade Justice Network describes the principal issues involved in recent and proposed trade deals, including those between the UK and EU, and UK and US.
War on Want explores the UK’s trade policies with countries in the global South, calling for agreements that will allow low-income countries to support their own industries and economies.
The ISDS Platform sets out how Investor State Dispute Settlement mechanisms work.
The International Institute for Environment and Development produced a report explaining how ISDS could increase the public cost of climate action.
The Corporate Europe Observatory and Transnational Institute explain the little-known Energy Charter Treaty, which allows energy companies to sue governments for changes in energy policy which might lose them money, including policies supporting renewable energy.
Over recent years many countries have reduced their tax rates on businesses, hoping to attract inward investment from multinational corporations. But this can easily lead to a ‘race to the bottom’, in which tax competition leaves all countries with lower revenues. Low-income countries are hurt the most, and corporations are the beneficiaries.
Multinationals anyway find it easy to avoid high tax rates by ‘profit shifting’ and ‘transfer pricing’, the creative accounting methods by which profits are allocated to the countries and states where taxes are lowest. It is estimated that this costs governments globally up to 10% (approximately $240bn) of corporate tax revenues every year, money that could have been spent on public services, or that must instead be found from smaller businesses and citizens. Some large multinationals pay almost no corporate taxes in the UK (and other countries) at all.
At the same time both corporations and wealthy individuals have been able to make extensive of tax havens, usually small nations which seek to attract foreign capital by exempting it from tax altogether.
Proposals for international tax cooperation coordinated by the OECD have been given a boost by President Biden’s commitment to internationally agreed minimum corporation tax rates. At the G7 Summit in 2021, finance ministers agreed in principle to a global minimum corporate tax rate of 15%, marking major progress in the taxation of multinational companies.
A number of proposals have also been made for national taxes on multinationals, and for closing tax havens.
Economist Gabriel Zucman explains how multinationals engage in profit-shifting between different countries to lower their tax liabilities – and how governments can overcome this.
The Independent Commission for the Reform of International Corporate Taxation (ICRICT) argues for a globally agreed minimum corporation tax rate of 25%. Where countries levied lower rates, corporations’ home states (such as the US) would ‘top up’ the companies’ tax to the agreed rate. More detail here.
Public Services International explains the ‘unitary principle’ under which a multinational would be taxed as a single entity, not as separate companies in different countries. The Tax Justice Network proposes a ‘Minimum Effective Tax Rate’ to allocate the taxes due on a company’s global profits.
IPPR proposes an ‘Alternative Minimum Corporation Tax’ as a unilateral measure to tax multinationals consistently reporting low or zero profits. It would apportion a firm’s global profits according to its UK sales. Richard Murphy provides an illustrative example of how this would work.
TaxWatch proposes a digital services tax on the giant tech companies such as Google, which typically charge their subsidiaries royalties on their ‘intellectual property’, which they then claim is located in low-tax jurisdictions.
Author of Treasure Islands Nicholas Shaxson explains how tax havens work, and sets out a series of measures to tax offshore wealth used by both individuals and companies.
Covid-19 vaccination programmes in most low-income countries have been proceeding much more slowly than in richer countries. This is both because of lack of finance, and because most of the available supply has been bought by the global North. It is generally accepted that the pandemic will only end when almost everyone in the world is vaccinated, since without this there will be a high risk of new variants being transmitted across borders. Universal vaccination will also hasten global economic recovery. But in practice ‘vaccine nationalism’ has so far dominated.
A global scheme for vaccine distribution, Covax, has been established, and high income countries have pledged money and vaccines to it. But both finance and supply are running well behind demand.
Many proposals for reform focus on the dominant private sector-led model of vaccine development and supply, which it is argued puts profit and the retention of intellectual property rights ahead of meeting human need.
Before the G7 Summit in 2021, the US had signalled its support for patents on Covid vaccines to be temporarily waived in order to facilitate their production in the Global South. But Germany, the EU and the UK resisted this. Instead, vaccines will be bought from pharmaceutical firms using public money and then donated to lower income countries.
New international frameworks for financing and developing vaccines, medicines and health services in the global South have been proposed.
Olivier Wouter and colleagues in The Lancet review the challenges of producing affordable global vaccines at scale, warning that the lack of a global approach to vaccine allocation by national governments is both an economic and ethical failure.
Reviewing the UK’s overseas aid health programmes, Action for Global Health warns argues that a new strategy is needed. Save the Children warns that the UK seems to be reducing its emphasis on supporting global health.
A blog from the IMF head Kristalina Georgieva and others outlines A Proposal to End the COVID-19 Pandemic, setting out targets to vaccinate at least 40% of the global population by 2021 with estimates of financing requirements; through upfront grants to COVAX, investing in additional vaccine production capacity and test and tracing capabilities.
The People’s Vaccine Alliance is calling for public funding for research and development to be conditional on research institutions and pharmaceutical companies freely sharing all, data, biological material and intellectual property, and all vaccines priced at cost.
Analysing how the pharmaceutical industry currently develops new drugs and health treatments, the UCL Institute for Innovation and Public Purpose propose a new health innovation model which would reward public investment, keep prices low and therefore support more equal global access to healthcare.
The World Health Organisation describes the aspiration for universal health coverage (UHC), giving all individuals and communities the health services they need without suffering financial hardship. Writing in Nature Medicine, Stéphane Verguet and colleagues propose how this can be achieved in low and middle income countries.
The global spread of the Covid-19 pandemic has highlighted the interconnected nature of today’s world. But the international response has not been equal, with huge differences in the capacities of high income and low income countries to control the spread of the coronavirus and to pay for vaccination programmes. The disparities have highlighted the need for a stronger system of international cooperation and equity, not just in the health field but across a range of issues.
Many of the world’s most pressing problems cannot be solved by national action alone. They include global poverty and security; climate change; the protection of the oceans; and the regulation and taxation of transnational corporations operating across national boundaries. The 17 Sustainable Development Goals, adopted at the United Nations in 2015, embody the international community’s economic, social and environmental priorities.
Over recent years international cooperation has been in decline, particularly in multilateral fora such as the United Nations and the G20. The return of great power rivalries, particularly between the US and China, along with the impact of economic weakness and Brexit on the unity and reputation of the European Union, have led to a fracturing of international relations. The UK government, for its part, has declared a new post-Brexit vision of a ‘Global Britain’, but what this should mean is not always clear.
In this context a wide range of voices have been calling for a revival of international and multilateral cooperation and for a new, positive role for the UK.
Describing the crisis faced by low-income countries, former Prime Minister Gordon Brown has called a ‘$2tn 21st-century Marshall Plan for the developing world’, including a new issuance of ‘Special Drawing Rights’ at the IMF to fund debt relief in Africa (paywalled).
In an essay for the Observer Research Foundation in India, Amrita Narlikar argues that a renewal of multilateralism will require a new ‘bargain’ to distribute the benefits of globalisation more fairly and reform of existing rules and institutions to meet new challenges.
Calling for a revival of multilateralism, an international group of former UN Secretaries-General, Presidents and Prime Ministers (known as The Elders) have set out a new agenda for international cooperation, with a particular focus on strengthening global health systems, increasing ambition on climate change, and achieving the Sustainable Development Goals.
In their report Finding Britain’s Role in a Changing World, the Foreign Policy Centre and Oxfam argue that ‘Global Britain’ needs an underpinning statement of principles against which UK foreign policy can be assessed. The pledge to spend 0.7% of Gross National Income on aid must be restored.
Chatham House Director Robin Niblett argues for a new foreign policy for the UK. Rather than reincarnating itself as a miniature great power, the UK should serve as the broker of solutions to global challenges, such as promoting international peace and security, tackling climate change, and championing global tax transparency and equitable economic growth.
In the decade before the pandemic, public sector pay fell behind the rising cost of living, so that in real terms public sector workers earned £900 less per year in 2020 than they did in 2010. Some workers have seen particularly sharp falls in pay, including teachers (£1349), local government residential care workers (almost £1900), firefighters (£2508) and early career nurses (over £3000).
In this context, the Government’s recent restraint on public sector pay has attracted criticism. First, many claim it undervalues the work of millions of public sector key workers who have already seen a decade of pay cuts. Second, economists of all stripes have questioned the wisdom of cutting wages while simultaneously trying to stimulate economic recovery. Third, some fear public sector pay restraint will exacerbate inequalities, as women and those living in poorer regions of the UK are disproportionately likely to work in the public sector.
The longer-term issue is building public sector capacity. Before the pandemic, public sector wages had fallen to a 25 year low relative to the private sector. At the same time, funding cuts have led to increased pressures on workers, further exacerbating recruitment and retention difficulties. In the short-term, pain in the private sector labour market and heightened interest in public service are likely to ease recruitment problems. Without efforts to reverse longer-term trends, however, we risk further undermining public sector expertise - leading to increased reliance on outsourcing - and failing to rebuild resilient public services after Covid-19.
The House of Commons Library briefing on public sector pay outlines how pay is determined for different workers, and gives details of Government policy and trends relating to public sector pay.
The Trades Union Congress report on decent pay and secure work for key workers contains analysis and recommendations relating to the public sector workforce, which employs around half of all key workers.
Prior to the pandemic, recruitment and retention challenges in health and social care led to a combined shortage of over 222,000 full-time equivalent staff across NHS England and adult social care.
The IPPR's State of health and care: The NHS Long Term Plan after Covid-19 report recommended a package of six changes that together form a “£12 billion blueprint to ‘build back better’ health and care”, including an urgent 5% pay rise for NHS staff, social care free at the point of need for all and a living wage guarantee for care workers and changes to immigration rules
The IPPR’s Parth Patel and Chris Thomas outlined what ‘build back better’ should mean for an “exhausted and over-stretched” healthcare workforce, drawing from YouGov polling to inform its practical recommendations.
Clare Foges, Times columnist and David Cameron’s former speechwriter, has written on the need to restore public sector expertise to “stop the coronavirus gravy train” - the millions of pounds spent on outsourcing and consultants due to a lack of in house capability.
