Progressive realism and UK aid cuts: how to make the best of ‘difficult decisions’

Invoking the concept of ‘progressive realism’ in international affairs, the UK Government has announced that the UK’s aid budget will be cut from 0.5 to 0.3 percent of GNI (gross national income) to help pay for an increase in defence spending.  This has come as a shock to those working in international development.  Charities and UN agencies have described it as – and these are direct quotes - savagely deep, a blow to Britain’s reputation  and a betrayal of the world’s most vulnerable children and the UK’s national interest, which will put children’s lives at risk. 

These cuts are proportionately larger than the much-criticised cuts imposed in 2022 under the previous government (from 0.7 to 0.5 percent), and come on top of the Trump administration’s near-closure of USAID (the world’s largest donor). At a time of slowing progress in tackling global poverty, and growing challenges to economic and social development in low- and middle-income countries, cutting UK aid is a major blow to those countries and to the UK’s international profile and influence.  

Given that these cuts have been announced, what should happen now?

As the quantity of aid is cut, quality matters more than ever

The worst possible outcome from this week’s announcement would be if the much-reduced budget was spent badly. There is a lot of room for improvement. Reviewing the mis-managed merger of the Department for International Development (DFID) and the Foreign and Commonwealth Office (FCO) to create the current Foreign, Commonwealth and Development Office (FCDO) in 2020, followed by dramatic in-year cuts in 2022, the Economist concluded that Britain has blown its reputation as a world leader in aid.

Things were starting to improve recently. A sensible and broadly bipartisan White Paper in the final days of the last government identified the conjoined issues of extreme poverty and climate change as the framework for thinking about development. But the state of UK development cooperation is still less good than it could and should be: and sadly, there remains plenty of scope for it to get worse again if these new cuts are managed badly.  

Progressive realists recognise that spending on defence needs to increase significantly. (Although that increase also needs to be accompanied by major improvements in the quality of spend: it is quite possible, and common, to spend very large sums very badly on military procurement.) Some of them may reluctantly accept that a cut to the aid budget reflects a difficult choice to find (some of) the money to make this possible: though it should be noted that the former head of the British army has argued that the increased defence budget should not be at the expense of the aid budget. But assuming the decision will not be revisited, what remains is to ensure that the downsized aid budget is spent well – on places, people, and problems which are genuine priorities for development.

To have a small but high-quality aid programme, the FCDO needs to be very clear on what development aid is for  

'Development' here means addressing acute needs and improving opportunities for the poorest and most marginalised in a world that remains deeply, structurally unequal and unfair. What is counted as aid spend needs to be directed to where it is needed, and where it can work. As a matter of principle, but particularly when there is so little of it, aid should not be used to buy geopolitical influence or seek to provide a (marginal) advantage for UK exports.   

This involves a set of difficult balancing acts. A principled, informed, and resolutely realist development policy – of the kind that the UK was known for in the past – requires that we tackle the big, structural, long-term threats to communities least able to cope with them (climate change, stuttering economic growth, and yes, conflict) at the same time as keeping people alive and addressing pressing immediate needs for healthcare, education, and decent work opportunities so they can work their way out of poverty.

What would a much smaller but effective and self-respecting UK aid programme look like?  We can identify some propositions to get started:

The aid budget should be administered by FCDO

The downside of the rise in the aid budget to 0.7 percent of GNI in the last decade was the corresponding increase in the share of this budget that was spent outside DFID, with much less rigour in design, implementation, and monitoring, and much less transparency in reporting. With the budget now less than half of what it was then, fragmentation and a lack of strategic vision are unaffordable luxuries. The merger of DFID into the FCO was disruptive and expensive: nonetheless, among all HMG departments the FCDO is clearly best qualified to manage aid spend. Building on legacy DFID and FCO capacities, the FCDO is best equipped to identify, design and implement effective projects, synthesise lessons learned, feed this back into the process, and frame aid in reference to knowledge of national context and international relations. 

The Government should fund in-UK costs of refugees from domestic budget lines, not aid

The previous Government used the aid budget to cover the accommodation and other costs of refugees in the UK. This has not yet changed. This is allowed, to an extent, in the Organisation for Economic Co-operation and Development (OECD) rules on accounting for aid: but the UK is an outlier in the extent to which it has pushed this allowance. In 2023, these costs – all spent within the UK – came to £4 billion, or 28% of the aid budget. Most critically, they amounted to nearly 0.2 percent of GNI. If an aid budget that shrinks to 0.3 percent of GNI continues to be used to fund in-UK refugee costs at this level, that will leave the budget available to spend on development in other countries at just 0.1% of GNI. This would be severely embarrassing.

FCDO, and the Government as a whole, should take the ‘beyond aid’ development agenda seriously  

In humanitarian crises, and over longer timeframes for desperately poor people even in ‘normal’ circumstances, aid can make the difference between life and death. With ambition and intelligence, it can also be used strategically to help facilitate international action that supports development. But international development, and ‘development cooperation’, is much bigger than aid. What the UK does beyond the aid budget through diplomacy, trade and investment policy and, yes, military deployments can all contribute to making the world safer and richer. 

UK diplomatic efforts can and should complement aid spending in helping to achieve global public goods – collective action on climate change, conflict prevention and resolution, preventing the emergence and spread of pandemics, and a global economy that works for all, including people in poverty. UK foreign policy needs to contribute deliberately and meaningfully to development objectives.  

The process matters when managing downsizing 

Faced with large and growing needs around the world, policy and country teams in FCDO will be competing to make the case for shares of the shrinking budget. Significant chunks are already committed as contributions to multilateral development agencies (which, depending on the agency in question, can be an objectively efficient and effective way to support development).  

Analysing the previous 2022 rounds of cuts under the last Conservative government, Ranil Dissanayake at the Center for Global Development showed that the cuts appeared to fall largely randomly, ‘like Thanos clicking his fingers’.  In part because there was relatively little fat in DFID’s programme, it was hard to find many projects to cut on the basis of poor performance.  

This time around, the FCDO does at least have two years to manage the cuts, rather than manage them in the same year that they were announced, which was so disastrous last time. But as the aid budget gets ever smaller, there is less and less scope to maintain a little of everything, and the FCDO is going to face some brutally hard choices about the extent to which is can still – for example – tackle the long-run development-killer of climate change and respond to current humanitarian emergencies (see a good analysis from CGD by Ian Mitchell and Sam Hughes). As Ranil suggested in 2022, annual programme reviews may need to switch from asking whether the programme achieves the objectives it was set at design (most do), to asking whether it contributes to achieving a smaller set of high-level UK aid goals.  

Managing a 40% cut so that the shape and structure of the smaller aid programme in 2027 still serves some coherent strategic purpose, while retaining a breadth of capacity that will (hopefully) allow it to expand again ‘when fiscal circumstances allow’, will be a difficult task. To pull this off will require:
•    a capable and dedicated leadership team, drawn from senior staff who understand development and are fully focussed on managing this process for the next two years; 
•    a determined effort at the outset to consult, internally and with stakeholders outside the FCDO, to reach an acceptable consensus on an overall vision and a set of developmental principles that will guide how aid budget decisions will be made, however painful those will be; 
•    and a process which allows for communicating in good time to governments, NGOs and UN agencies who are going to be affected in order to give them a chance to survive and recover.  

Hard decisions, soft power

None of this is going to be easy.  But having embarked on this course, which will make the UK the least generous of all G7 donors, the FCDO needs to manage it as well as it possibly can. It needs to take a coherent, systematic approach, making the most of UK comparative advantage as a ‘broad spectrum’ donor with a legacy of a stronger-than-usual focus on understanding and supporting what works. A focus on goals, coherence and effectiveness will help to minimise the very real damage the cuts will cause: this is important first and foremost for the poorest and most vulnerable, but also for the UK’s credibility and influence. As Foreign Secretary Lammy observed himself, in discussing the ‘extinction level event’ imposed on USAID, aid is an important part of a nation’s projection of soft power. Cutting it can be a big strategic mistake, creating a vacuum in which China – seen by the Government as a strategic rival to the UK - becomes the preferred and trusted partner to governments in low- and middle-income countries.  

On coming to power last summer, FCDO ministers spoke of the need for rebuilding partnerships with other countries, and basing our foreign policy – including development policy - on genuine partnership, trust, and respect. If that respect is to extend to the poorest countries, and the poorest citizens in those countries, and not just to larger and wealthier countries which are geostrategically important, then the next two years really matter. The government, and the UK, will be judged on how well it can steer the course it has chosen, and whether it can manage to be progressive even as it strives to be realist. 

About the author:

Tim Conway is a specialist in poverty analysis and social protection. He has worked on various aspects of the social protection agenda, including: donor HQ roles in global evidence synthesis, policy development and bilateral programme portfolio guidance and monitoring; assessing Government and NGO poverty targeting systems; supporting country-level poverty and vulnerability analysis and national dialogue on developing social protection strategies; and four years designing and managing UK support to the Ethiopian Productive Safety Net Programme, including extensive involvement in donor coordination and donor-government dialogue.