IFFIm

The International Finance Facility for Immunisation

BBC Radio 4, Today

7 November 2006

Evan Davies, BBC economics editor

Introduction

The Chancellor, Gordon Brown, will be standing alongside the leaders of Britain’s major faiths today. They’re the first customers for bonds he’s issued today to fund to an immunisation programme for the world’s poorest children. He’s raised the money by promising to pay future interest out of Britain’s aid budget in years ahead. But, does it make sense to do it that way? Here’s our economics editor, Evan Davies.

Evan Davies

It’s an awkward acronym, IFFIm, the International Finance Facility for Immunisation. But IFFIm is one of the Chancellor’s big ideas for helping make poverty history. Recognising that millions of children in poor countries go without any vaccination, the Chancellor wants to direct resources towards immunisation and IFFIm is a means to do so. It’s a collaboration between about half a dozen countries and it will direct about $4 billion over 10 years towards the Global Alliance on Vaccines and Immunisation, that’s about $4 hundred million a year, a big injection of cash for immunisation, although, of course, in terms of the sacrifice made by the economies of the sponsors it is just a tiny scratch.

Now, IFFIm is not just a fancy name for a grant being paid to help the poor. It’s actually a rather complicated bit of financial engineering. It’s a scheme for borrowing money. About a billion dollars will be borrowed today. And what’s clever about all this borrowing is that it’s off the books. Even though the UK taxpayer is responsible for paying a chunk of it back, it won’t show up in the national debt. There’s no need to understand it. The good folks at Goldman Sachs and Deutche Bank are handling the transactions.

But there is something interesting about IFFIm: even though it’s in a good cause, everyone involved assumes that if the borrowing was not off the books, the Government wouldn’t have backed it. Somehow, we needed to disguise the cost to entice ourselves to do it. In fact it would have been marginally cheaper for the British Government to borrow money in the conventional way - on the books - but, hey, it’s worth paying a bit extra to keep the debt hidden. That extra cost of borrowing through IFFIm by the way is not much, about one third of one percentage point on the interest rate paid.

But isn’t it a bit depressing that in order to do something of a modest cost, and something that will on all reckoning save 10 million lives, we have to go to all the trouble of setting up a complicated and opaque financial structure like IFFIm? If immunisation’s so good, why can’t we just do it? I make the point because there are two great issues the Government is taking a stand on - global poverty and global warning.

Accepting our overseas aid targets and accepting the Stern review, between them we need to muster another one and a half percent of our national product to spend on these global causes. Yet IFFIm is taking just a tenth of a tenth of one per cent of our national income and getting it off the ground has been quite a job. So, if you believe in spending money to deal with global problems, you’ll celebrate IFFIm today, but you’d better hope that in future we’ll find dome easier ways to persuade ourselves to spend money on good causes.