Grant cuts threaten aid agencies

A number of aid agencies could be forced to close because the Government is diverting funding to the UN and the European Union.

In a stinging attack on Clare Short's Department for International Development, Christie Peacock, chief executive of FARM-Africa, said the department's policy of increasing the proportion of its budget which goes to the UN and the EU would bankrupt some smaller and medium-sized UK charities. "They are in dire straits. Some will almost certainly close, especially the ones which don't have a public fundraising programme, she said.

"Clare Short has cut back the role of NGOs in British aid programmes and all we get are bits and pieces from the Challenge Fund. She doesn't appear to believe in NGOs and has attacked them publicly many times. Does she or does she not want a vibrant, diverse NGO sector?"

Grassroots projects in the developing world are being left to wither on the vine, while aid money goes directly to governments, according to Peacock.

The Reading-based international aid agency Children's Aid Direct was forced to close all projects in May because income from its supporters could not compensate for underfunding from state sources. Peacock predicts that other charities will follow. "All donors are squeezing administration costs in grants. The real administration cost of delivering a project if you want to do it properly is 15 to 20 per cent of the total project cost, but the most you get is 6 to 8 per cent. Clare Short's argument is that we shouldn't be parasites living off the Government. There is some legitimacy to that but when the real costs are not covered it's just not fair, she said

Richard Bennett, general secretary of aid agency umbrella body BOND, confirmed that smaller charities were being squeezed. "The funding environment for UK NGOs is especially tight and smaller specialist agencies are often feel it most keenly. Their size means they can often be more flexible and innovative in responding to changing circumstances than huge bureaucracies such as the EU and UN, he said.

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