TNAG-0339-FCO40-375-Aid-to-Hong-Kong-from-UK-1972 — Page 69

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THE AID FRAMEWORK 1972/73 to 1975/76

Note by the ODA

1. It has become necessary to withdraw the aid framework paper sub- mitted to Ministers but not so far considered by them and to prepare the attached revised framework for consideration, first at official level and then for resubmission to Ministers.

2. On the experience. of underspending of the aid programme for some years past, the framework that has now been withdrawn was based on a gross estimating adjustment of 25%. However, experience in the second half of the current year suggests that for a variety of reasons this is now proving too large an adjustment. Most recently preliminary returns from ODA departments have also indicated that for the year 1972/73 the maintenance of a gross estimating adjustment of 25% might lead to considerable overspending. There seem to be a number of

rising reasons for this change in capacity of aid expenditure: costs, the allocation of more money to blocks of expenditure which yield no estimating adjustment, an increase of new commitments at a time when the older mainly Commonwealth commitments are barely beginning to run down and probably a growth in the expertise of departments in the management of their programmes.

3. We cannot yet be sure that this change in capacity to spend is permanent but until we have evidence to the contrary we must assume that this is so and so far as we can, subject to suffering serious political or commercial damage, revise our programmes to keep within permitted expenditure. We have not yet sufficient experience to propose a precise new system for the management of the programme and Meanwhile this will have to be worked out over the next few months. as something of a blunt instrument we are proposing in the attached revised framework cuts from the earlier framework which would reduce the estimating adjustment which we would seek to achieve in 1972/73 to about the same amount as the likely actual adjustment for 1971/72 and would lead to comparable estimating adjustments for the later years of a little over half the previous gross figure of 25%. The attached documents show both the cuts proposed and the suggested new framework figures. The major difficulties naturally arise in the year 1972/73 and the adjustments proposed here are of comparable difficulty. We have felt forced to withdraw the offer in the previous framework to provide up to £20m as necessary in 1972/73 for relief and rehabilitation for the Indian sub-continent over and above normal programmes there. We have also asked the Treasury to agree that the programme for next year should not be reduced by an amount that might otherwise be required to compensate for some potential overspending in 1971/72. Taking account of these major adjustments the cuts that we are proposing from earlier framework figures may still in a number of cases be difficult to achieve. main areas of uncertainty are probably these:-

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The Dependencies

While the total is still slightly increased for 1972/73, it may still be difficult over the period for the Dependent Territories Division to keep within the framework figures; they are likely to contribute little or nothing to the estimating adjustment.

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