Economic Watch: Britain’s foreign aid budget faces cuts amid fiscal constraints

by Xinhua writer Zheng Bofei
LONDON, Nov. 4 (Xinhua) — The British government has announced a 2-billion-pound (about 2.59-billion-U.S. dollar) reduction in its Official Development Assistance (ODA) budget, reducing foreign aid spending from 0.58 percent of Gross National Income (GNI) in 2023 to 0.5 percent in the upcoming years.
This move, which lowers the aid budget from 15.3 billion pounds (19.84 billion dollars) in 2023 to 13.3 billion pounds (17.25 billion dollars) in 2024-25 and 13.7 billion pounds (17.77 billion dollars) in 2025-26, highlights Britain’s fiscal challenges.
While reducing the ODA budget, the British government increased defense and intelligence spending in the recent Autumn Budget, which has sparked debate. Supporters argue that this move will enhance the country’s global presence, while critics contend that reducing aid undermines support for vulnerable populations.

BALANCING BUDGET
Despite the reductions, Downing Street emphasized that the government remains committed to eventually meeting the 0.7-percent GNI aid target, contingent upon economic improvements.
“The government has been clear about the tough choices and trade-offs necessary to restore economic stability and balance the books. That is necessary to support strong public services in the long term and forms the basis for any sustainable economic growth,” said a government spokesperson.
Established in 1970 by the United Nations, the 0.7-percent GNI target has become a widely recognized standard among wealthy nations for supporting global development, poverty reduction, and humanitarian efforts. Although Britain enshrined this target in law through the 2015 International Development Act, fiscal pressures have prompted reductions in aid spending.
In 2021, then-Conservative Chancellor Rishi Sunak introduced fiscal tests required to restore the target, stipulating that the Office for Budget Responsibility (OBR) must confirm the government is not borrowing for day-to-day expenses and that underlying debt relative to GDP is falling. Although both Labour and Conservative governments have affirmed their commitment to the 0.7-percent target, the OBR’s Spring 2024 forecasts suggest that these tests may not be met until 2028-29.

FAILED SCHEME
The Labour Party has particularly criticized the previous Conservative government for allocating significant ODA funds toward domestic refugee support, including the now-canceled Rwanda scheme.
According to the government’s statistics on international development, in 2023, refugee support accounted for 27.9 percent of total British ODA, marking a 600-million-pound (about 778.2-million-dollar) increase from the previous year.
Initially introduced by the Conservative government, the Rwanda scheme aimed to deter illegal immigration by relocating asylum seekers to Rwanda for processing. Since its launch, the controversial scheme has faced legal challenges and public backlash over its cost and ethical implications.
During a speech at the House of Commons in July, Labour Home Secretary Yvette Cooper revealed that 700 million pounds (about 907.9 million dollars) had already been spent on the Rwanda scheme, with only four individuals sent under the program.
The Labour government scrapped the scheme after winning the general election in July. When answering the question on the government budget deduction, the spokesperson told Xinhua that the government would make “savings of over 4 billion pounds (5.19 billion dollars) by scrapping the expensive and ineffective Rwanda scheme and will reinvest that funding into border security and the Border Security Command.”

DEFENCE AND INTELLIGENCE BOOST
The Labour government’s decision to reduce ODA spending and allocate funds to domestic programs, such as defense, has sparked debate.
The reduction in ODA has drawn criticism from prominent figures, including Bill Gates, co-chair of the Bill & Melinda Gates Foundation, who called the move “a disappointing outcome for the world’s most vulnerable populations.”
The newly released budget allocates an additional 2.9 billion pounds (3.77 billion dollars) to defense, raising the British defense spending above NATO’s 2-percent GDP target and putting it on course to reach 2.5 percent of GDP.
The budget also includes a 3-billion-pound (3.89-billion-dollar) annual commitment for military assistance to Ukraine and an additional 340 million pounds (440.98 million dollars) for the Single Intelligence Account, covering the Secret Intelligence Service, Government Communications Headquarters, and the Security Service.
The independent think tank British Foreign Policy Group (BFPG) viewed the budget positively for British foreign policy despite the difficult fiscal context.
“Even though the budget does not make huge new commitments, it provides opportunities for Britain to maintain its position on the world stage,” said Evie Aspinall, director of BFPG. “In the current context, we couldn’t expect much more.”
In September, British Prime Minister Keir Starmer said at the UN General Assembly that his Labour government is “returning the UK to responsible global leadership.”
However, it remains to be seen whether these budget adjustments will sustain the country’s role in international development. ■