The UK Spending Round 2013


DI analysis of the effect of today’s Spending Round on UK aid

  • The Chancellor maintains UK’s 0.7% of national income commitment, announcing £12.2 billion aid budget in 2015/16.
  • Government departments other than DFID to provide increasing aid share, with expanded climate and conflict funds proposed.

In today’s Spending Round, the Chancellor declared himself “proud to support a Government that is the first in our history” to meet the 0.7% pledge in 2013, while acknowledging pressure from some quarters to relax the aid ‘ring‑fence’ which protects it from spending reductions across other government departments.

While legislation in this Parliament obliging the UK to allocate 0.7% of national income to aid looks unlikely, the Government has consistently stated that it would continue to do so.  The Chancellor stated the UK Government would maintain its commitment to spend 0.7% of national income as Official Development Assistance (ODA) into 2015/16. The decision comes amid difficult circumstances for the UK economy and public spending.

 

Aid expected to account for 1.6% of total government spending in 2015/16

Bubble graph showing aid as % of UK government spending

Planned aid and government spending in relation to national income forecast, 2015/16
[Source: OBR March 2013 GNI forecasts; HM Treasury, Spending Round 2013, tables 1.1 & 2.13]

 

Not all UK aid spending comes from DFID, and its share is set to fall slightly

The Department for International Development (DFID) budget and ODA are often treated as interchangeable, but some of DFID’s budget is not eligible to be classed as aid (for example spending in support of some overseas territories), and spending by other departments can be classified as aid if this meets international rules overseen by the OECD.

The DFID budget will increase by 7.8% (£809 million) in financial year 2015/16 compared with 2014/15 (the last year covered in the 2010 Comprehensive Spending Review). Over 95% of this is ODA: £10.3 billion of the £11.1 billion total in 2015/16.

Other departments provided 12.6% of total UK aid in 2012. The Chancellor said DFID would retain “the lion’s share” of ODA, but plans announced today will see the non-DFID share rise to 13.3% by 2015/16. The change from current levels as a share of total aid spending is small, but represents a 50% or £0.5 billion increase (from £1.08 billion in 2012 to £1.62 billion by 2015/16; comparable calendar/financial year data are not available).

As noted in a previous briefing, the aid that DFID provides is subject to the International Development Act (2002) requirement that it be poverty‑reducing. While other departments could choose to follow this criterion, they are obliged only to meet the less restrictive OECD criteria: that aid be primarily for the economic development and welfare of developing countries and concessional in character.

It will be interesting to see which departments deliver these increases and how. No detailed forecasts of other departments’ ODA are published, although some departments – have begun to publish up to date information under the International Aid Transparency Initiative, including the FCO(see DFID business plan, 2.1.iii).

The Spending Round document offers some clues:

  • a new ‘Conflict, Stability and Security Fund’ (over £1 billion), overseen by the National Security Council which would build on the existing Conflict Pool but bring in new resources “across government to prevent conflict and tackle threats” from instability overseas (Box 2.C): it is not clear how much of this would be ODA, but the Conflict Pool accounted for £116 million of UK ODA in 2012;
  • increased climate change work in developing countries (to £969 million) through a combination of DFID, Department of Energy and Climate Change (which provided £241 million of ODA in total in 2012) and Department for Environment, Food and Rural Affairs (para 2.64).

 

Other things to follow

It is also worth noting that the UK will continue to commit at least 30% of ODA to fragile and conflict-affected states, while also increasing ODA in areas of UK expertise, such as science and research, and also strengthening tax collection, an important means to increase developing country capacity to raise their own resources to reduce poverty.

The Spending Round document also states that the Government may continue its policy of ending aid programmes in ‘middle income countries’, such as India and South Africa, “to focus aid where it is needed most”. Large numbers of poor people still live in many countries defined as middle income on World Bank criteria. Therefore it remains to be seen whether ending such programmes necessarily leads to a greater focus on need. More details on Government plans in this area are needed. We will also explore this issue in our ‘Investments to End Poverty’ report in September 2013.