Government aid motion spells end of 0.7% target, experts say

The United Kingdom government’s aid spending plans would effectively spell the end of the legally enshrined target of spending 0.7% of gross national income on aid indefinitely, according to economists.

Members of Parliament are voting on Tuesday on whether to approve a government motion on development assistance spending, which would create economic requirements that would need to be met before the Treasury would restore the 0.7% target.

If MPs were to reject the government’s motion, aid spending would return to 0.7% in January, but a statement from Chancellor Rishi Sunak warned this would have “likely consequences for the fiscal situation, including for taxation and current public spending plans.”

Sunak’s statement, published on Monday, finally outlined the meaning of the much-repeated but undefined government line that 0.7% aid spending would be restored “when the fiscal situation allows.” The criteria will be when the government is “not borrowing for day-to-day spending and underlying debt is falling" according to the statement.

The government’s proposal “amounts to cutting the aid budget to 0.5% indefinitely” said Ian Mitchell, senior policy fellow at the Center for Global Development.

He said this was because most government budgets run to a budget deficit — with only one exception in the seven years since the 0.7% target was instigated — and the “deficit is firmly in the Government’s control.” He added: “It’s a very high bar to ask of any public expenditure to only be spending in years where there is a current public deficit.”

Other estimates have suggested the conditions for meeting the government’s threshold for 0.7% could be even rarer. “Little time to analyse the detail, but it seems in the last 20 yrs we would only have met the HMT’s conditions ONCE,” tweeted Elizabeth Sugg, who resigned from the government over the aid cuts. “So a vote for the motion means no 0.7% for the foreseeable future. A vote against means a return next year,” she added.

Ranil Dissanayake, also a policy fellow at CGD, told Devex via Whatsapp: “It’s a way higher bar than aid spending has had to clear before. It’s an attempt to find a set of rules convincing enough to win over some rebels but hard enough to satisfy that he will not actually have to return to 0.7[%]. It’s not based in economics but politics.”  

Sunak’s proposals are “bad macroeconomics” according to Mark Miller, director of program at development and public finance at the Overseas Development Institute. “There is a clear case that investing in global efforts to contain the pandemic, to support relief spending, so that the global economy will bounce back quicker once [the] pandemic is under control,” he said.

Miller cited International Monetary Fund calculations, which suggested that investing $50 billion in pandemic recovery efforts could bring about $9 trillion worth of returns by 2025.