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Britain's foreign aid: Where does the money go?

Britain says foreign aid budget will remain capped, as watchdog probes how overseas funds are diverted to help refugees in the UK.

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Children collect recyclable trash at a landfill in Cambodia. Image: World Bank Photo Collection, CC BY-SA 3.0, via Flickr.
Thomson Reuters Foundation
5 minute read

British finance minister Jeremy Hunt said on Thursday it would not be possible to restore the aid budget to 0.7 per cent of gross national income from its current level of 0.5 per cent, adding that public spending would grow more slowly than the economy.

Addressing parliament as he unveiled the government’s autumn spending review, Hunt said just over half of the needed 55 billion pound ($65.21 billion) fiscal consolidation would come from cuts in spending.

“It won’t be possible to return to the 0.7 per cent target until the fiscal situation allows. We remain fully committed to that target,” Hunt said.

This comes a week after British watchdog Independent Commission for Aid Impact (ICAI) launched a review into how the country’s foreign aid budget is spent as poverty-fighting cash is increasingly channelled away from overseas projects to fund domestic initiatives.

Planning to publish its findings in early 2023, the ICAI said a growing portion of funds that would normally be spent in poorer nations was being used to support refugees in Britain - a shift that has drawn criticism across the political spectrum.

“Much of what is called ‘aid’ is now spent inside the UK. This is shocking for the UK’s reputation and catastrophic for many of the world’s (very) poorest,” said former Conservative aid minister Rory Stewart on Twitter.

Britain’s Conservative government reduced overseas aid from 0.7 per cent to 0.5 per cent of gross national income (GNI) in 2020 in order to free up more cash for domestic spending during the Covid-19 pandemic, despite a law that enshrined the higher figure.

“

The UK government needs to restore aid spending to 0.7 per cent of GNI to prevent a continual yearly cycle of uncertainty and project cuts, which leads to devastating consequences for the world’s poorest people.

Richard Watts, development finance expert, Save the Children

The move slashed billions from the annual foreign aid budget, and has impacted almost all international programmes dealing with global health and humanitarian work, according to Bond, a network of UK development agencies.

Prime Minister Rishi Sunak, who oversaw the cut when he was finance minister, said at the time that foreign spending should return to 0.7 per cent of economic output by 2024-2025.

Aid and justice groups say the shortfall would be a huge blow to poorer countries as they struggle to recover from the pandemic and grapple with a global cost-of-living crisis exacerbated by the war in Ukraine.

Here are all the details:

How much does Britain spend on overseas aid?

In 1970, Britain pledged to spend at least 0.7 per cent of GNI on foreign aid as part of a UN pact.

It is among 30 wealthy countries including the United States, Germany and Japan that have vowed to meet this minimum commitment each year.

Britain’s overseas aid spending last year totalled $15.8 billion, down from $18.6 billion in 2020, according to 2021 data from the Organisation for Economic Co-operation and Development (OECD).

How does other countries’ aid spending compare?

Several countries have exceeded the UN aid target including Germany (0.74 per cent), Luxembourg (0.99 per cent), Norway (0.93 per cent) and Sweden (0.92 per cent), according to the OECD.

The United States was the biggest cash donor last year. It spent $42.3 billion, followed by Germany ($32.2 billion), Japan ($17.6 billion), Britain, and France ($15.4 billion).

Total official development assistance (ODA) in 2021 rose by 4.4 per cent from the previous year, the highest figure on record, the OECD said. The spike was mostly due to funds being spent on Covid-19 vaccine donations, it added.

Why is Britain changing the way aid money is spent?

Britain has been reviewing foreign, defence and security policy following its departure from the European Union.

In 2020, it merged its diplomatic and aid departments to form the Foreign, Commonwealth and Development Office (FCDO).

Charities have said that scrapping a separate development body risked money being diverted to address foreign policy interests rather than alleviating poverty, which itself fuels migration and insecurity.

Dominic Raab, the former foreign minister who oversaw the department merge, has defended the measure, saying the pandemic had shown how security, prosperity, development and foreign policy were inextricably interlinked.

Which countries receive UK aid money?

The top five countries to receive UK aid money in 2020 were Ethiopia, Nigeria, Somalia, Afghanistan and Yemen, with almost all funds going to countries in Africa and Asia, according to government data.

In 2021, about 744 million pounds, or 6.5 per cent of the aid budget, was spent on humanitarian assistance such as disaster relief, a decrease from 1.53 billion pounds during the previous year, preliminary government data showed.

Nearly a third of the aid budget last year was spent by departments outside the FCDO - the biggest spenders being the Department for Business, Energy and Industrial Strategy (BEIS) and the Home Office.

The BEIS - which says it spends aid money to fight climate change and boost security and governance - spent 929 million pounds, while the Home Office increased its spending by 53 per cent to 915 million pounds, due to a rise in asylum seeker accommodation costs, according to official data.

The ICAI said refugee support costs within Britain have risen since 2014, and made up more than 8 per cent of all UK aid spending in 2021, about 891 million pounds.

A September report by the U.S.-based nonprofit Center for Global Development said Britain could be using up to 3 billion pounds for hosting refugees in 2022 - a quarter of its aid budget - mainly to accommodate Ukrainians.

A record number of 40,000 migrants have arrived in the country via small boats so far this year, sparking calls for tougher border security from some quarters.

But charities and politicians have raised concerns over the detention centres and hotels that house newly-arrived migrants, with the Independent Chief Inspector of Borders and Immigration describing the conditions of one centre as “pretty wretched“.

How could recipients of UK aid be impacted by these cuts?

Aid groups say reducing the aid budget will harm the world’s poorest, hinder climate action and damage Britain’s reputation as a leader in international development.

Groups such as the Tropical Health and Education Trust, which supports maternal care in poorer countries, and Water Witness International, which runs climate resilient projects in Tanzania, have said all their government funding has halted.

“The UK government needs to restore aid spending to 0.7 per cent of GNI to prevent a continual yearly cycle of uncertainty and project cuts, which leads to devastating consequences for the world’s poorest people,” said Richard Watts, a development finance expert at charity Save the Children.

This story was published with permission from Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, resilience, women’s rights, trafficking and property rights. Visit https://www.context.news/.

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