UK aid budget 'totally transformed' as another £1.5B cut looms

Experts have warned the United Kingdom’s aid budget has undergone a “total transformation” as it spends more at home than internationally. The warnings follow an announcement which suggests that around £1.5 billion ($1.85 billion) will be cut from the Foreign, Commonwealth and Development Office’s portion of the aid budget next year, due to extensive spending by the Home Office on refugee costs including hotels. This is the second year in a row that FCDO's aid budget will be almost 20% lower than planned. Program allocations released Thursday, as Parliament prepared to close for a two-week recess, show that FCDO will have £7.6 billion to spend in 2022-23, and £8.1 billion to spend in 2023-24. FCDO was previously projected to have £9.3 billion to spend in 2022/23, and official development assistance, or ODA, was projected to increase by around 3.5% in the next year, suggesting the FCDO budget would have been around £9.6 billion. Despite an improving economic situation overall and an additional £2.5 billion allocated over the two years, both total FCDO aid budgets are less than in 2021, when after the aid budget was reduced from 0.7 to 0.5% of gross national income, FCDO still spent £8.1 billion. International Development Minister Andrew Mitchell acknowledged “difficult choices as our spending plans have changed.” The figures come the same week as Independent Commission for Aid Impact, a watchdog, revealed that in 2022 the government spent around a third of the aid budget, £3.5 billion, within the U.K.’s borders — largely on hotels for refugees amid an accommodation shortage in the U.K.. This amount is likely to have increased because of higher numbers of Ukrainian refugees since, but using the aid budget in this way was criticized by ICAI as causing “major disruption” for international programs. The government has shown no sign of limiting aid spent propping up the U.K.’s dysfunctional asylum system, and has insisted this spending, covering the first year of a refugee in the U.K., is allowed under the Organisation for Economic Co-operation and Development’s Development Assistance Committee rules and meets a humanitarian need. “These new plans confirm our worst fears: the UK can hardly call this ‘foreign’ aid when the Home Office spends more of it at home than the FCDO spends in developing countries in total,” said Ranil Dissanayake, senior research fellow at the Center for Global Development. “It’s a complete break with the past, and a total transformation of our aid budget. No-one could possibly justify these allocations on development grounds.” The plans show the U.K. expects to spend between three times and five times more aid within the U.K. than bilaterally in all of Africa, according to Dissanayake. Bilateral spending in Africa will fall from £765.9 million this year to £648.1 million next year. Reducing aid spending in lower-income countries, while spending in the U.K. has increased, is “a complete reversal of the historical balance of how foreign aid is used by the UK,” said Dissanayake. Despite the overall FCDO aid budget going up, aid to Afghanistan and Pakistan will be cut by over half, falling from £304.4 million to £141.9 million. “With over 24 million people in need of assistance in Afghanistan, this reduction in funding will have a devastating impact,” said Dorothea Arndt, CEO of Hand in Hand International, urging the government to reconsider the “disproportionate” cut. Spending in Latin America, the Caribbean, and small island developing states will fall from £35.2 million to £25.8 million. There were further cuts to economic security, research and evidence, Europe, and Southeast Asia and the Pacific. The other cuts included: • The £66 million standalone “vaccines” category disappeared altogether from the 2023-24 budget figures. • Global health and COVID-19 bilateral spending dropped from £58.4 million this year to £41.8 million next year. In 2021. Even after the aid cuts, the FCDO planned to spend £1.3 billion on global health and COVID-19. • All categories under the Humanitarian and Development directorate will see cuts apart from international finance, according to the figures. Despite a commitment in the International Development Strategy to “substantially rebalance” the aid budget from multilateral organizations in favor of bilateral funding, the FCDO’s aid budget will continue to skew towards multilateral organizations over bilateral funding, spending £3.3 billion and £2.5 billion respectively. This is magnified in 2023-24, in one of the few spending increases for that year, with £3.9 billion to be spent multilaterally — a.k.a. through international institutions — and £2.1 billion bilaterally, which tends to affect NGOs and smaller projects. Other increases next year include: • FCDO’s operating costs, going up from £606 million this year to £691 million. • Funding for the development finance institution British International Investment, formerly CDC Group. The financial transactions category under which BII falls is going up from £411 million to £554 million in 2023-24 — money spent in this way is less costly to the government’s balance sheets. British Investment Partnerships funding will more than double, from £53.3 million to £108.9 million, in spending designed to mobilize private sector investments. • Overseas territories funding increased by £5.1 million. • Spending for Eastern Europe and Central Asia, under the Defence & Intelligence directorate, is going up by nearly £4 million. • There are also modest increases to certain priority areas, including open societies and human rights, increasing by £6 million, as well as international finance, technology and analysis, and energy, climate and environment. “It is disappointing that the FCDO published its UK aid budget for 2022-23, not only eight months late, but also on the final day of the budget period. This is alarmingly untransparent and blocks effective scrutiny of how the government is spending UK aid,” said Mike Wright, director of membership and communications at Bond. He described the figures as “shocking” and said the formatting of the budget meant “it is impossible to get an accurate understanding of the total amount that was planned to be spent on humanitarian support, health, education and gender equality.” Because FCDO allocations in 2021 were made thematically, sometimes encompassing multilateral and other spending, rather than bilaterally, civil society organizations “have no idea how much is actually being spent compared to previous years and are unable to monitor whether the government is spending taxpayers' money on development and humanitarian issues as promised,” added Wright.