Is the FCDO turning a corner on UK aid?

The Foreign, Commonwealth & Development Office has published its annual report and accounts, revealing a detailed breakdown of recent Official Development Assistance (ODA) spending – and what is on the horizon.

Last week, the Foreign, Commonwealth & Development Office (FCDO) published its annual report and accounts for 2022 to 2023. These reports provide a detailed breakdown of the FCDO’s official development assistance (ODA) spend during the last financial year and a budget for the following two years. The overall narrative also provides insight into how the FCDO views its own priorities and where development sits within its strategy.

Here’s what we learnt.

Despite recent falls, UK ODA is set to rise from 2024

The report tells us that in 22/23, FCDO bilateral spend to sub-Saharan Africa fell by 17% compared to the previous year and by 9% in the Middle East and North Africa, including a 13% reduction to Afghanistan.

In the current financial year (23/24), the total FCDO ODA budget will rise marginally, and then rise by 12% in 24/25 to £8.3bn. These planned increases are a positive sign but are unlikely to reverse the impact of the previous five years of cuts to ODA. The budget also relies on the Home Office reducing its use of ODA for domestic costs, which is not guaranteed.

One positive of the planned budget for 24/25 is that it seems to recognise and go some way to correct the cuts that have disproportionately fallen on low-income and conflict-affected countries. Spend across Africa is set to increase by 111% between 23/24 and 24/25, including an increase of 140% to Ethiopia and 135% to the Democratic Republic of Congo, while increases are also planned for Afghanistan (50%), Yemen (60%) and Syria (26%). Overall, as a percentage of UK ODA, the FCDO’s bilateral country spend will rise from 27% in 22/23 to 32% in 24/25.

Promoting “Global Britain”

The overall narrative report provides insight into the role development plays in the FCDO’s strategy. The department’s top priorities are focused on UK interests, with development framed as a means to “promote Global Britain”.

This is reflected by the fact that British International Investment (BII), the UK’s investment institution for international development, is one of the big winners in this budget. Between last year and this year, the budget for British Investment Partnerships is set to increase by 13.7%, then a further 129% the following year. There is no transparent information on how this is split across different investment instruments, but the latest BII business case addendum suggests a large proportion of this will be channelled through BII.

There are serious concerns about the transparency, effectiveness, and poverty-focus of BII’s investments. Prioritising spend through BII over other routes is the wrong choice, as it reflects the Treasury’s preference for funding private investment to reduce the impact of the ODA budget on the public finances, rather than what will best deliver for people and communities who have been marginalised.

Climate change

The accounts also reveal a restructuring in the teams working on climate. Overall, the amount being spent through the departments covering “energy, climate and environment” has increased by 138% between 21/22 and 22/23, with a further 20% increase planned for 23/24 and 13% for 24/25. This includes steady increases for the International Forest Unit, relative stability for the UK Partnership for Accelerating Climate Transitions and fluctuations across the Adaptation, Nature and Resilience Department and the Climate Finance and International Systems Department. All of these budget lines are newly introduced in this year’s report which means we cannot easily assess whether they are meaningful increases or simply a restructuring of existing funds.

For other thematic areas such as health, education and migration, the pattern largely shows cuts in 22/23 and 23/24, followed by increases in 24/25. Spend through the health departments follows this pattern, falling by 15% in 22/23 and 21% in 23/24, before increasing by 32% in 24/25. Similarly, the education, gender and equality departments fall by 17%, then 5% before rising again by 153%. The conflict, humanitarian and security department has disappeared, and the newly formed humanitarian and migration department receives 52% less in 23/24 before then increasing by 69% in 24/25. This may not be the totality of spend to these thematic areas – some of it may be classified under other teams’ budgets, as well as that being spent through multilaterals – but does present a stark contrast to the increase going to BII.

A welcome improvement in transparency

This year’s reports and accounts provide a much-needed improvement in how the FCDO communicates its development spend. Last year, the budget was not published in July, and although it was eventually released, it only appeared on the final day of the year it covered. Additionally, this is the first time the FCDO has provided a multi-year budget for countries. This breakdown will help the development and humanitarian sector understand long-term plans and monitor the difference between the plans outlined in this budget and actual spend.

Although these improvements in transparency are welcome, the annual report does not provide a full understanding of UK ODA plans and impact. It contains only a few limited indicators on the impact of the FCDO’s development spend, which fall far short of the thorough evidence provided in previous eras of development spend.

Because the budgets in the report are structured by departments rather than as exhaustive categories, we cannot draw complete conclusions on thematic priorities. Simply because one department’s budget has been reduced, it does not follow that that spend has definitely been cut – it may have just been moved into a different department’s budget line, although the publishing of the country breakdowns recognises and goes someway to address this challenge.

In reaction to the report, Stephanie Draper, Chief Executive of Bond, the UK network for NGOs, said:

Whilst Bond welcomes planned increases to UK aid spending for Afghanistan, Yemen and countries in Africa from 2024, spending in these regions remains below levels for 2020 and is yet to recover from four years of devastating cuts.
“Continued high levels of uncontrolled UK aid spending in the UK by the Home Office are restricting efforts to scale up spending on poverty reduction, humanitarian crises and climate change. While significant increases in UK aid spending through British International Investment (BII) is also not justified by its questionable development impact.
“Looking forward, the government must urgently stop UK aid being absorbed by ballooning domestic costs and questionable private investments and instead re-prioritise spending to address the root causes of poverty and inequality in lower-income countries and respond to humanitarian crises around the world.