The Chancellor’s Spring Statement adds to the expected pain of the UK aid cuts

Following the Prime Minister’s announcement on 25 February that the UK’s Official Development Assistance (ODA) budget would fall from 0.5% to 0.3% of gross national income (GNI) by 2027, the Chancellor’s Spring Statement was not expected to bring any cheer for the development sector.

However, the decisions announced yesterday by the Chancellor on how the ODA cuts will be introduced have deepened concerns about the devastating impacts these cuts will have on millions of people across low- and middle-income countries (LMICs).

What did the Chancellor announce and what does it mean for UK aid ambitions?

ODA cuts will start immediately and are being frontloaded

Most significantly, the Chancellor confirmed that the ODA cuts will start immediately, with a cut (compared to the original budget of 0.5% of GNI) of £0.5 billion in 2025/26, followed by huge cuts of £4.8 billion in 2026/27 and £6.5 billion in 2027/28, when UK ODA will reach 0.3% of GNI. The Chancellor has therefore chosen to frontload the UK ODA cuts, with three-quarters already delivered during 2026/27.

Bond’s members had been calling for exactly the opposite approach, of backloading the cuts (ideally in full, by maintaining UK ODA at 0.5% of GNI in 2025 and 2026) so that additional resources would be available for vital development needs in the lead up to 2027.

These unnecessary cuts to UK ODA of more than £5 billion planned over the next two years are equivalent to the level of spending required to contribute more than 10% of global unmet humanitarian funding needs as well as to maintain the UK’s role in supporting GAVI (the global vaccine alliance), the Global Fund for Aids, TB and Malaria (GFATM) and the Global Partnership for Education (GPE) – all of which are being replenished in the coming year. This funding could therefore have helped to improve and safeguard many millions of lives across the world.

0.3% of GNI is no longer a firm government target and UK ODA spending may fall below this level

The Spring Statement confirmed that, in a change to long-standing practice, the ODA budget set out for the period 2025/26-2029/30 (based on current projections of GNI) will not be adjusted to reflect changes to projected GNI. Previously, these figures are revised as new more accurate data comes in so that ODA spending targets can be met.

Of course, existing practice means that GNI can be projected down (leading to cuts to planned ODA) and not just up (leading to growth to planned ODA). However, for the period 2023/24-2025/26, the GNI projections made by the Office for Budget Responsibility (OBR) have been consistently revised upwards over the last two years (with exception of a small downwards adjustment in the March 2024 projections). So much so, that if the March 2023 OBR projections for GNI for 2023/24-2025/26 were used to fix the ODA budget over this period, then UK ODA would have been around £1 billion less in each of these three years than the level currently estimated to be required to meet the 0.5% of GNI target.

Unless the OBR has found a way to avoid under-estimating GNI in future years, then the move to fix the ODA budget for 2025/26-2029/30 based on current projections of GNI over this period means that it is very possible that UK ODA will fall below 0.3% of GNI in the coming years.

Ending of the FCDO’s role as ‘spender of last resort’

The Foreign Commonwealth and Development Office (FCDO) currently has the status of ‘spender’ and ‘saver’ of last resort as regards the ODA budget, which means that it either sacrifices or receives ODA in-year to ensure that spending meets targeted levels (0.7% of GNI before 2021 and 0.5% of GNI since). It has been confirmed that the FCDO will no longer have this status, and its budget will be fixed in the Spending Review.

In a number of recent years, FCDO has lost out from having this status, especially with the ballooning levels of in-donor refugee costs (IDRCs) reported as ODA by the Home Office during 2021-23, which led to FCDO sacrificing huge portions of its budget.

However, in 2024 FCDO was allocated an additional £540 million in ODA at the end of the year due to higher-than-expected GNI and lower than expected levels of in-donor refugee costs. It is also the case that, as the government has ambitions to reduce IDRCs further, and could speed these efforts up with added reforms, there is significant potential for FCDO to benefit as ‘spender of last resort’ in the coming years. Losing this status means that FCDO will not benefit from the upside of these costs coming down faster than planned.

It is not too late for the government to change course

As the government’s plans for implementing the planned UK ODA cuts have become clear, it is apparent that there has been little effort to ease the likely damage of these cuts, which the ONE campaign estimates may threaten the lives of 600,000 people.

It is not too late for the government to change course. At a minimum it must commit to much more ambitious action to reduce in-donor refugee costs and return the savings to the FCDO to allocate to overseas programmes. This can be done by committing to end the use of hotels for housing asylum seekers by 2026 and move to using more appropriate and cost-efficient community housing.

It is also critical that decisions on the remaining ODA budget are made in a transparent and participatory way, and that it is allocated towards the countries and sectors where the us of ODA is most urgent for tackling poverty and reaching the most marginalised people.

Finally, the Prime Minister and Chancellor must urgently support calls from the global South and civil society to commit to ambitious policies on tacking the global debt crisis, reforming the global tax and trade system to make it more equitable and to tackle the challenge of illicit financial flows from the global South.