‘More of UK’s foreign aid budget spent inside UK than in poor countries’

The UK is now spending more of its international development budget at home than in poor developing countries, experts have said.

That is because a large proportion of the pot is being spent on housing refugees, mainly from Ukraine, according to the Centre for Global Development (CGD).

Rishi Sunak was criticised for slashing the foreign aid budget from 0.7% to 0.5% of national income when he was chancellor, as well as setting a precedent for letting the Home Office and other departments use the pot, and stretching the rules on what can be counted as aid.

The UK aid budget is around £11 billion, with some £4 billion going to multilateral institutions including the World Bank.

Of the remaining £7 billion, which is administered by the UK directly, more than half will be spent domestically this year, including some £3 billion on housing refugees, according to CGD’s analysis.

While the UK is allowed to count refugee-hosting costs as official development assistance (ODA) under internationally agreed rules, it is one of only a few countries – and the only one in the G7 – to fund all the costs of Ukrainian refugees from its existing aid budget, the Washington and London-based think tank said.

Ranil Dissanayake, policy fellow at CGD, said: “The development budget – the pot of money we put aside to help the world’s poorest people – is being squeezed from every angle.

“Not only was it slashed by almost a third, Rishi Sunak then set a precedent as chancellor for letting other departments claim whatever they could back from this pot.

“Saying we spend 0.5% of our national income on aid is becoming meaningless, when such a huge proportion of this pot is being spent domestically, rather than on helping people facing enormous hardship across the world.”

One of the key Tory MPs who rebelled against Mr Sunak’s aid budget cuts last year, Andrew Mitchell, has now been appointed by the Prime Minister as development minister in the Foreign Office.

The appointment was seen as significant as Mr Mitchell, a former international development secretary, could increase pressure on Mr Sunak to honour his pledge to return to 0.7% international aid spending by 2024-25.

However, the Prime Minister is considering freezing the budget for an extra two years – saving £4 billion a year – as he eyes ways to plug a multi-billion pound fiscal black hole, the Telegraph reported.

Mr Mitchell “focused strongly on results for the poor, and value for money – at the moment, the way budgets are handled they deliver neither,” according to Stefan Dercon, professor of economic policy at Oxford University’s Blavatnik School of Government.

He tweeted on Wednesday: “Aid is now only 0.3% of GNI (gross national income) once we account for all asylum/refugee costs and other spending programmes for Ukraine inside the UK. That is now less than it was before 1997.”

He blamed the Home Office’s “(poor) management of accommodation costs in the UK” and predicted “more cuts to humanitarian spending for African and Asian crises, and less for those things the UK built a reputation for doing well.”

A spokesperson at the Foreign, Commonwealth and Development Office said: “Across government, there are significant pressures on the 0.5% ODA budget due to the costs of accepting refugees from Afghanistan and Ukraine as well as wider migration challenges. Obviously how many refugees arrive in any particular period is not certain, so there is not a fixed cost.

“We remain one of the largest global aid donors, spending more than £11 billion in aid in 2021, and UK aid has recently gone towards those in need in the Horn of Africa and Pakistan.”