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What will be the likely effects of reducing the UK’s aid budget?

Reductions in official development assistance inevitably involve choices – for example, between protecting future biodiversity and feeding children in today’s humanitarian crises. But the real loss from aid cuts is UK leadership on global responses to poverty, Covid-19 and climate change.

In July, the UK government announced that it would be cutting its international aid budget to 0.5% of gross national income, from 0.7% where it has been since 2015. Consequently, for the first time in eight years, the UK will not meet the United Nations (UN) target for aid spending by developed countries.

Predictions estimate that the UK will spend £10 billion on international aid this year, down from £14.5 billion in 2020 and £15.2 billion in 2019 (see Figure 1). Much of this funding goes to multilateral organisations – such as the World Bank or Global Fund – or large bilateral projects, both of which will channel some funding through non-governmental organisations (NGOs). Individual charities receive a very small proportion of this funding directly.

Figure 1: UK aid spending

Source: UK Government. Note: 2021 figure is a projection.

The government has stated that the reduction is temporary and a result of increased spending domestically to deal with the Covid-19 crisis. But what are the likely effects of this change in policy?

The short answer is that it is far too early to know. It will take some time for the full impact to become clear. This is often the case for any major change in government spending. But in the case of the aid cuts, any early assessment is further constrained by the lack of transparency as to where the cuts are happening.

In the last year, the UK government has radically changed its approach on transparency, and almost no details have been released officially. Instead, there are multiple reports of organisations being warned by the government not to discuss their cuts publicly.

A further complication of any assessment is that the first two rounds of cuts to date were just short-term cuts. They only covered spending in 2020 and 2021. According to the Office for Budget Responsibility (OBR), the vote in Parliament on 13 July 2021 implies that the lower level of spending in 2021 is likely to apply until 2025. While some programmes can manage a short term cut by changing spending priorities, it is the third round of longer-term cuts that will inevitably have the more profound impact.

In the last few months, many organisations have sought to assess and disentangle the various announcements and press reports to establish what this may mean for their budgets and therefore operations. Examples include: the Independent Commission for Aid Impact (ICAI)’s review of the management of the 2020 spending cuts, Development initiatives, Center for Global Development (CGD), Oxfam, Save the Children, BOND, the Overseas Development Institute and Thomson Reuters.

During this time Devex (a media platform for the development community) has been continually updating a list of all reported impacts. One of the latest assessments is also the longest: the House of Commons Library (HOCL) briefing. While it notes that the Foreign, Commonwealth and Development Office (FCDO) emphasises that final funding allocations have not yet been made, it seeks to summarise the cuts that have emerged to date.

These assessments, and other research, highlight six points about the likely impact of the aid cuts.

The overall scale of aid cuts is now clear: just 8% in 2020 but 29% in 2021-25

The first announcement of cuts to UK aid – or to be more precise, in ‘official development assistance’ (ODA) – was that aid would be reduced by £2.9 billion in 2020, a cut of 18% from the previous year.

This was the combined result of the unexpected impact of Covid-19 on the size of the economy and the long-standing commitment to provide ODA equivalent to 0.7% of total gross national income. As the size of the economy shrank, the ODA commitment automatically dropped.

Further, in July 2020, economic growth forecasts prompted the government to scale back the aid budget by £2.9 billion. As it turned out, the impact of Covid-19 on the economy was much less severe, so spending was increased in the final months of the year, and total aid was just £1.3 billion less than originally budgeted, a cut of 8%.

The second announcement of cuts followed the change in policy in November 2020 to reduce the proportion of gross national income spent on aid in 2021 from 0.7% to 0.5%, implying a cut of £4.4 billion or 29% of the current budget.

The impact of aid cuts has been made worse by exceptionally poor planning

The Independent Commission for Aid Impact (ICAI) scrutinises UK aid spending and in a recent review – along with other commentators – stated that poor planning around the cuts in 2020 put the quality of aid spending at risk.

The ICAI report also noted that the impact was compounded by ‘moving decision making about portfolio and programme adjustments away from those closest to the details of the programmes’. As summarised by the Guardian: ‘UK civil servants were given five to seven working days to prepare 30% cuts [and] Ministers spent only seven hours discussing the proposed £2.9 billion cuts […] and then imposed predominantly on the world’s poorest countries despite giving instructions for the opposite to happen’.

Despite plans to protect 40 extremely vulnerable countries, the ICAI report found that the cuts were six times larger in these countries than in others. Bangladesh, the Democratic Republic of Congo, Pakistan, South Sudan, Syria, Uganda and Yemen were the countries that saw the greatest falls in aid in terms of value.

The Institute for Fiscal Studies and Center for Global Development have warned that the speed with which the cuts have been made ‘combined with the constraints on where they can practically be made risks decision-making reflecting criteria other than programme impact or effectiveness’.

Part of the problem seems to be earlier decisions to maintain or increase certain areas of spending, which has meant that other areas have had to be cut back much more than the average rate of 29%. Further, this has often had to be done with almost immediate effect.

Many aid programmes have been cut by much more than 29% to make room for other increases

Given that the average reduction of aid in 2021 is 29%, one of the earliest, and still one of the most striking examples of the individual cuts, was the March 2021 decision of a nearly 60% reduction in humanitarian funding for Yemen, the world’s worst humanitarian crisis.

Most commentators had expected humanitarian funding to be protected, given the immediate direct impact that cuts would have on lives. Instead, humanitarian aid seems to have been disproportionately reduced. In addition to the 60% cut in Yemen, funding for CARE International UK’s work in Syria has reportedly been cut by 70% since 2019, resulting in 450,000 people losing support.

Surprisingly, the cuts have also applied to the seven priority areas that the government announced in December 2020, including climate change and education. Yet the largest climate resilience project in Malawi has been terminated. Similarly, Devex credits the first reported casualty of the cuts was an education programme investing in adolescent girls in Rwanda, while cuts to an education project in Bangladesh removed support for 725,000 school places.

Even though conflict was a new category among the seven priorities, many NGOs report cuts to conflict prevention work, including the closure of a peace building project in South Sudan, where conflict has led to large numbers fleeing and becoming dependent on humanitarian aid to survive. A project to reduce violence against women in Malawi has been completely cancelled. Even global health projects have been cut – a project monitoring livestock for future health risks has been cut by 70%.

Sectors outside the seven priorities have seen even deeper cuts. Spending on water, sanitation and hygiene is reportedly due to be slashed by 64%. Devex has also noted multiple examples of cuts in health and child welfare (apart from Covid-19 related work). Examples include:

  • A project to reduce malaria in Nigeria was ended three years early ‘with immediate effect’.
  • The International Planned Parenthood Foundation estimates that cuts to their services would result in additional 7.5 million unintended pregnancies and 22,000 maternal deaths.
  • Support for Unitaid, which provides medicines to poorer countries has been cut by 92%. It’s research on neglected tropical diseases has been cut by 90% and funding for global polio eradication by 95%.
  • Spending on nutrition is expected to be cut by 79%, with nutritional support withdrawn from 12 million infants in Bangladesh.
  • Global health issues would seem to be prioritised over supporting national health systems, prompting the Center for Global Development (CGD) to warn that reductions would put pressure on the core health services in many poor countries.
  • Support for the UN child agency, UNICEF, has been cut by 60%.
  • Similar cuts to UN development programme are expected to reduce access to basic services for 1.2 million people and scale back protection and restoration of land and marine habitats by 23 million hectares.

Figure 2: Disproportionate reported cuts in aid

Source: Author’s calculations

The cuts have involved trade-offs. One of the most striking examples is between protecting biodiversity in the future and feeding children fleeing from humanitarian crises today. Both are supported by UK aid, so there is a direct read across from the government’s promise in January 2021 (after the second round of cuts) to increase funding for biodiversity by £600 million a year over the next five years to the £110 million cut in support to Yemen’s children two months later.

The only encouraging note is that philanthropic funders, including Bill Gates, have stepped in with £94 million of funding to cover some of the £4.4 billion cuts.

The process of assessing the likely direct impact of the cuts is only just starting but they are affecting tens of millions of people

As the wide range of reported examples above shows, the cuts are affecting multiple sectors, countries and organisations – and the lives of tens of millions of people. Andrew Mitchell, the former minister in charge of the UK’s Department for International Development (DFID), has estimated that the cuts will lead to 100,000 preventable deaths.

But any assessment of the impact of the actual cuts is impossible in the absence of a comprehensive listing of the details. In addition, as the examples show, the cuts are not being applied evenly, so there is little value in exploring the impact of a uniform 29% cut.

In the absence of details, one approach to assessing the likely impact is to consider what the £4.4 billion of cuts could have been spent on in the long run. Research shows that the average cost of educating a child in low-income country is £106 a year, while providing basic healthcare costs £71 per person. If the £4.4 billion were split evenly between education and health (two major areas of UK aid in the past), this would imply a reduction of 20 million children receiving education and 30 million people receiving basic healthcare.

Another approach is to consider what £4.4 billion could buy in terms of tackling the Covid-19 crisis. Recent research suggests that this could reduce Covid-19 infections by 250 million in low- and middle-income countries and save 1.7 million lives.

The cuts are likely to have indirect impacts on both global aid and global climate finance

Whatever the direct impact of the cuts, there are also two other potential indirect effects.

First is the impact on global aid levels. The UK has been the only G7 country that has met the UN target of 0.7% and has long called for others to follow. The UK’s example was arguably a key factor in France’s plan to move to 0.7%. Fortunately, the cuts do not seem to have changed France’s views and the timetable for reaching this target by 2025 was approved in July by the French Assembly. Whether the UK decision will have an impact on other G7 countries is not yet clear.

The second indirect effect is on global levels of climate finance. In the run-up to COP26, the UN climate change conference in Glasgow in November, the past commitment by rich countries to mobilise ‘new and additional’ $100 billion of climate finance to support the poorest countries has become an intense focus of debate.

While the UK has committed to spending £2.3 billion a year on climate funding, the vote on 13 July has revealed that this funding will not be ‘additional’. Indeed, it will be more than offset by cuts to other programmes. The UK’s failure to mobilise additional finance undermines trust and the UK’s ability to lead the development of new policy commitments in other areas that are urgently needed.

Asking other governments to put cash on the table when the UK has reduced its own contribution will be a tough challenge to manage. The UK goes into COP26 with promises to secure its grandchildren’s futures, but made at the cost of the current generation of children in poorer countries.

The greatest impact may be the missed opportunity of vaccinating all of Africa

As economists love to point out, impact is ultimately about opportunity cost. It is not the programmes that have been cut, but the programmes that never started, where the effects are most likely to be the greatest.

As the World Health Organization (WHO) has noted, and the UK prime minister has stressed in reference to Covid-19 vaccines: ‘nobody is safe until everyone is safe’. The current low level of vaccinations in the poorest countries provides the perfect incubation for new variants, which will eventually spread back to the UK.

The International Monetary Fund (IMF) estimates the cost of ending the pandemic at $50 billion – and the benefits to the world at $9,000 billion. It is hard to think of any large-scale public investments whose benefits are 180 times greater than their costs.

If the UK aid programme had not been cut, but instead had been as ambitious, forward-looking and well-funded as the widely praised UK’s vaccine research and global purchase efforts, what would the direct impact have been on global vaccination levels now? And had the UK taken the global lead in 2020, what efforts might that have inspired the new US administration and other G7 countries to have done in 2021?

If a future variant of Covid-19 turns out to be vaccine-resistant and results in another round of UK lockdowns, the decision to cut aid by £4 billion, when the deficit was £394 billion and while defence spending was increased by £5 billion will seem extremely short-sighted. If the UK had temporarily scaled back non-Covid-19 aid spending by £4.4 billion and increased overall aid spending by just £2.2 billion, the UK alone could have financed 60% vaccination coverage in all of Africa.

Missing an opportunity to have such an impact – on Africa, the UK, the UK’s international standing, the kickstarting of the global mobilisation of $50 billion needed to end the pandemic and the chance to inspire and lead the COP26 negotiations – may be the real cost of the aid cuts.

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Author: Marcus Manuel
Note: Author is writing in a personal capacity
Editor's note: The IMF figures were previously listed in GBP, these have been corrected to USD.
Photo by Julie Ricard on Unsplash
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