LONDON — The U.K.’s development community is concerned about the prospect of losing hundreds of millions of pounds from the aid budget as the country’s economy contracts, at the same time as humanitarian and development needs climb.
The U.K. — the world’s third-largest bilateral donor — is one of the few countries to legally set its official development assistance budget at a minimum of 0.7% of gross national income, spending £15.2 billion ($18.7 billion) on aid in 2019.
The latest figures from the U.K. government show that DFID's portion of the aid budget continued to shrink in 2019, with some characterizing the development as “disappointing” and “a concern.”
The government recently reiterated its commitment to maintaining that percentage, but with the coronavirus crisis halting much of the country’s economic activity, GNI is expected to decrease next year — and with it, the cash value of the 0.7%.
The extent of the damage to the economy is still unknown, though most predictions make for grim reading. The Office for Budget Responsibility, the U.K.’s public finance watchdog, suggested that gross domestic product — a similar measure to GNI — could fall by 13% in 2020 if the lockdown lasts three months.
This “would comfortably exceed any of the annual falls around the end of each world war or in the financial crisis,” according to OBR.
As a result, many aid watchers are anticipating an equally dramatic drop in the aid budget, just as demands on those resources soar.
“There is no doubt that this reduction … will be taking away a lifeline for some of the poorest and most vulnerable people.”— Amy Dodd, head of engagement, Development Initiatives
Some pointed out that the government could choose to spend more than 0.7% of GNI on aid. However, “you would expect if Britain sticks to its 0.7% target and GDP is shrinking, then the absolute value of our national contribution would also reduce,” said Patrick Watt, director of policy, public affairs, and campaigns at Christian Aid. In such a scenario, it becomes “doubly important [to ensure that] U.K. aid is focused on the poorest countries,” he said.
Aaron Oxley, executive director at RESULTS UK, an anti-poverty campaign group, agreed. “Obviously, we're concerned about how any future GNI drop affects everyone, both at home and abroad,” he said. “Tough times are ahead.”
An analysis by Development Initiatives, based on the International Monetary Fund’s April “World Economic Outlook” report, predicts that U.K. ODA could fall by $529 million in a shorter economic downturn where the effects of the pandemic are under control by the end of the year. If the pandemic and associated downturn last into next year, $1.5 billion could be wiped from U.K. aid, it says.
“There is no doubt that this reduction — something we will likely see from other donors, too — will be taking away a lifeline for some of the poorest and most vulnerable people. It is going to be a very difficult choice for the U.K. government to have to make,” said Amy Dodd, head of engagement at Development Initiatives.
Dodd also warned that “other financial flows that are important for the poorest countries, like foreign investment and receipts from tourism, are already falling off.”
The World Bank predicts that remittances — money sent home by migrant workers, which people in many countries depend on — could fall by nearly 20%, the sharpest decline in recent history, as unemployment grows and wages fall.
However, Ian Mitchell, senior policy fellow at the Center for Global Development, noted that the drop in ODA is not a given. The 0.7% target “is minimum, not a maximum,” he said via email, highlighting that the government often exceeds its 2% defense spending target.
“We’re in a global crisis where we’ve rightly massively expanded domestic U.K. spending in spite of the economy shrinking — public [spending] will increase by some £85.5 billion, or 10% according to the OBR — and it follows that poor countries will need support to save lives too,” he said.
If there were a drop, campaigners said it would be important for the U.K. government to make the most of the remaining money by focusing it where it is needed most and reallocating funds from projects that do not emphasize human development.
“We are committed to pushing for the same things much of the sector has been calling for for some time now: [for] less effective programming — which is usually not run by DFID — to be deprioritized and for DFID's spending on health, nutrition, and education ... to be maintained and even expanded, given increases in need, even if the overall pot shrinks,” Oxley said.
A DFID spokesperson said: “The government is committed to spending 0.7% of its Gross National Income on international development to help the world’s poorest people.
“We are using the aid budget to urgently tackle the coronavirus pandemic by helping to develop a vaccine and improve vulnerable health systems. We are also helping make economies more resilient and providing humanitarian relief to the worst affected countries.”
Update, April 27: This story was updated to include a comment provided after publication.