Where is UK Development Policy Headed Under the New Government?
The UK budget last week implemented a significant cut to the UK’s aid budget this year. In this blog, I examine this cut within the context of the new government’s commitments and explore what we might expect in the coming period.
Chancellor unmoved by cuts of aid budget
The headline is that the UK aid budget was cut by £1.5 billion ($1.9 billion).
Despite the flags, it seems the Chancellor was unwilling or unable to provide additional funds to offset the billions of pounds of the UK’s aid budget spent on supporting refugees inside the UK. This makes her the first Labour chancellor to cut aid below levels of a prior Conservative government.
These within-UK refugee costs can be counted as Official Development Assistance (ODA), though this stretches both the spirit of ODA and claims that this government will restore the UK’s internationalist credentials. The last administration provided an additional £2 billion towards the £4.3 billion of refugee costs which were counted as ODA last year.
In the new budget, total UK aid, including the in-donor refugee costs, will drop from £15.3 billion in 2023 to £13.9 billion in 2024 and then rise to £14.3 billion in 2025. So that’s respectively, 0.58 percent, 0.5 percent, and 0.5 percent of Gross National Income.
There is a commitment to bring within-UK refugee cost down so in principle that could release more non-refugee ODA funds. But of course, in reality, those costs may not come down, and could even go up, given increases in small boat arrivals this year.
Not surprisingly, it looks like the fiscal tests which were set by the last government for returning to spending 0.7 percent of gross national income on aid won’t be met in the current parliament. in fact, they were rarely met over the last two decades. The Chancellor did not change the second of those tests, on falling debt to match her more forgiving measure of fiscal liabilities, despite calls for her to do so.
The other crucial part of the financial mix is meeting the International Climate Finance (ICF) target that forms the mainstay of the UK’s commitment to international finance under the Paris Agreement. Given so much of UK ODA is counted by UK refugee costs, a lot of what’s left needs to be moved into, or rebadged as, climate finance. That has consequences too for the emerging priorities of UK development policy.
So, where is UK policy going on development?
Labour’s election win has come with an oft-repeated promise that “Britain is back”. As the Labour manifesto put it, “regaining Britain’s global leadership on development is a key part of our plan to reconnect with our allies and partners.” Prime Minister Starmer promised at UNGA that his government was “returning the UK to responsible global leadership.” So, what does that mean? Speeches by Starmer at the UNGA, the Foreign Secretary David Lammy at Kew Gardens and the Minister for International Development at the Foreign, Commonwealth & Development Office (FCDO), Anneliese Dodds at Chatham House provide some insight into the direction of UK policy.
Starmer’s speech at the UNGA flagged UK support for the reform of the international financial system so the Multilateral Development Banks take on more risk guarantees; and to make sure the voices of the Global South are heard by getting fairer representation in the sense of a permanent African representation on the security council, as well as Brazil and India too; and a declared move from paternalism to partnership. Sounds like all good stuff.
Lammy’s remarks at Kew emphasized climate as central to foreign policy—so far, so good, though not quite what that fully means in practice. In contrast, Dodds’ focus was a “modern” approach though again so far, so good, though not quite what that fully means in practice. The reference points were largely around humanitarian aid, with emphasis on her recent trip to Sudan. There were also many examples of what various cabinet ministers are doing related to development.
Three reviews with one more relevant than others to development policy?
Three reviews of development policy are currently underway, though one appears to be more relevant on development than the others.
Leading the set is the review by Nemat (Minouche) Shafik, formerly Permanent Secretary at the Department for International Development, who has also held senior roles at the Bank of England, World Bank and IMF, London School of Economics and Columbia University.
Dodds made reference to Shafik’s review as ”the” development review—while not mentioning the other two(though the others look potentially significant to development too). The Shafik review (let’s call it that so it has a label), focuses on maximising the benefits of integrated development-diplomacy (let’s call it “dev-dip”) policy or “modernising” the UK offer (modernise here and in Dodds' speech seems to mean making fit for the new geopolitical context). There is a tension here, in that the poorest countries may matter less to geopolitics (though more for geoeconomics and critical minerals for example). In contrast, it’s likely to be the populous middle-income countries that matter more for dev-dip. That has some implications for policy beyond aid, which we’ll come back to in a moment.
The first of the other two reviews are led by Ngaire Woods of Oxford University, on the UK’s global impact and relationships and shared objectives, again in a geopolitical world (this is well embedded throughout the reviews, which isn’t a surprise given the current global context).
The second is led by Michael Donnelly, a former Permanent Secretary at both Business and International Trade departments. He is not surprisingly focusing on trade, investment, economic capabilities in diplomacy, and—perhaps more surprisingly—on ensuring UK jobs and UK growth are at the heart of UK foreign policy. So, one read of this is it’s FCDO officials’ job to grow the UK economy.
All three reviews are expected to report by the end of the year.
So, what does all that add up to so far?
0.7: So close yet so far?
The much-discussed return to the 0.7 percent ODA target feels forever on the horizon. So close but so far. The government remains committed to the aid target of 0.7 as soon as UK finances “allow.” There’s still been very little said about the fact that over half of all UK bilateral aid is spent in the UK. The optimistic take is that that the UK spend aka “in-donor” costs should come down over time (or at least that’s the hope) and it would gradually release funds for other spends in the FCDO. Or, of course it could also go up or take some years to fall. Further, as noted above, much of what is not refugee costs will need to be rebadged climate given the ICF commitment.
R.I.P DFID 2.0
As it stands, recent Lammy indications appear to lean strongly towards a full integration of diplomacy and development given the geopolitical shifts, rather than the re-establishment of an independent development department (i.e. a DFID 2.0). Even the notion of ring-fencing a dedicated development “bit” within the FCDO seems off the table. Of course, the reviews could change this is. However, the review details seem to rule this out. Perhaps the chorus singing for a new DFID has triggered some annoyance at the top of the FCDO.
Climate-Diplomacy-Development as the frame
So, climate change appears to be the central theme, shaping development priorities across the board. At the same time, development-diplomacy integration seems already baked in, as does the idea that FCDO is now responsible for creating UK jobs and UK growth. The service of UK-centric jobs does jar a bit sitting alongside internationalist ideals. Many FCDO civil servants working outside climate action may well have pivoted already, reframing what they do in a climate lens. That’s easy enough, though it implies doing the same stuff and just reframing and talking about it differently. It is a bit unclear how UK jobs will result directly from FCDO policies, other than through investment and procurement opportunities from climate cooperation.
What fell off the table since the election?
There seems not to be much talk of locally-led development evident under Lisa Nandy just before the election. The previous government had committed to a new localisation strategy in the White Paper, and the Labour manifesto talks about "genuine partnerships" with developing countries. So maybe it will make a comeback. For now, it seems to have been supplanted by “we are listening” (though perhaps only listening to priorities as long as they are climate related or framed?). There has also been a lot of talk of providing UK expertise and knowledge to the world, which sits a little uneasily with the listening thing.
Ending extreme poverty seems to have slipped down the agenda too, despite its affordability at a global level. Pure speculation: development policy as promoting green economic development, is about to make a strong comeback. There has also been very little emphasis on the UN’s Sustainable Development Goals (either now or post-2030), possibly because of the dire outlook on this. And no discussion of something post-2030. There has also been much less talk of fragile states.
Less money, more policy?
If there’s less money, what will the UK government do to restore its international leadership (as it promised in its manifesto)? Policies beyond aid is one answer (often referred to by the totally unappealing wonk label of ”policy coherence for development”). An alternative is to call it attending to ‘transnational spillovers’ but that’s not much better. But this needs serious focus across Whitehall. A concerted effort in some of these areas would be helpful. Take for example (and this might be a few ideas for the new International Development Select Committee or the Independent Commission for Aid Impact (ICAI) to mull over too): Do all or some the flagship five ‘missions’ for UK matter for development policy? (i.e. good for the UK, good for development priorities?) Or, what’s the development policy angle of the Green Prosperity Plan or the talk of Supply Chain Commission? And what do non-cash reparations for slavery and colonialism mean? (I have a feeling the reparations discussion will become a big deal globally, as it did at the Commonwealth Heads of Government Meeting recently). Anything on debt rules in the city of London vis-à-vis debt servicing and restructuring? How about a development angle to the proposals for an UK-EU security pact?
What we can say for now is that it is these kinds of policy questions that will become more important, especially if it’s a case of ”more policy, less money” for UK development priorities at least for this parliament.
Andy Sumner is Deputy Executive Editor of Global Policy, Professor of International Development at King’s College London and President of the European Association of Development Research and Training Institutes (EADI). His research focuses on questions related to economic development and inequality dynamics across the Global South.
This first appeared on the CDG's blog.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
IMAGE: By Adrian Pingstone, Public Domain
