David Cameron has used this week’s G7 summit to highlight the issue of corruption. This is how his initiative was reported in the Telegraph:

“The Prime Minister will use a G7 summit in the coming days to call on world leaders to ‘shine a spotlight’ on corruption amid concerns that aid money funded by British taxpayers is being siphoned off by criminals and unscrupulous politicians.

“He will call on the international community to ends its ‘international taboo about pointing fingers’ and help end the estimated £1 trillion in bribes that are paid across the world every year.”

The FIFA bribery revelations may be hogging the headlines right now, but the misuse of aid money is the bigger scandal by far. It’s good to see some acknowledgement of this from the British Government:

“‘Just as with FIFA, we know the problem is there… At international summits, leaders meet to talk about aid, economic growth and how to keep our people safe. But we just don’t talk enough about corruption. This has got to change.’

“Mr Cameron added: ‘Corruption is the cancer at the heart of so many of the problems we face around the world today. It doesn’t just threaten our prosperity, it also undermines our security.’

“Asked if the focus will be on countries currently given British aid money, a Government source added: ‘This is an area where he thinks we should be doing more. Part of that is starting to change the approach and the mind-set – and part of that is looking at what more we should be doing.’”

The PM can hardly be accused of raising this issue as an excuse for cutting the aid budget. Britain is the first G7 country to honour its commitment to spend 0.7 per cent of GDP on international development. However, Britain also needs to lead the world in ensuring that the aid it does give isn’t being used to fund corruption.

Henry Hill, writing on ConservativeHome a few days ago, argues that we must improve the quality of spending, not just its quantity:

“…too often when it comes to aid the mere fact of spending money seems to be more important than how it is spent, especially when huge budget increases leave DfID scrambling to get cash out of the door.

“This gives the impression that ring-fencing the foreign aid budget was, at least in large part, an act of ‘values signalling’ on the part of the Government, as much as a hard-headed commitment to Britain’s charitable efforts overseas.”

There are those who disagree with the very concept of the 0.7 per cent aid target, but for the foreseeable future it’s here to stay – indeed it is now enshrined in legislation. So how does DfID exercise a greater degree of caution over the money it sends abroad while ensuring that enough cash gets ‘out of the door’ to meet the target?

For a start, there should be a stronger presumption that any cash that can’t be responsibly allocated in one year should instead be invested for use in future years. It would be like setting up a sovereign wealth fund – only for the benefit of the poorest people in the world.

What might such a fund be used for? There’d be no point in making it a mini-version of DfID because that would replicate the problem of responsible allocation. One possibility would be to provide a prize fund to incentivise the development of medical treatments for neglected tropical diseases. The innovation prize concept could be extended to other technological breakthroughs that the developing world needs, but can’t yet provide the commercial incentives for. Note that this wouldn’t be an annual prize, but rather one that is awarded when, and only when, the prize-giving criteria are met.

Come to think of it, the principle of not spending public money until there’s a productive use for it is one that ought to be applied more generally.