Today, UK MPs will be given a vote on whether to support a continued reduction in the UK’s ODA budget to 0.5% of gross national income. The Chancellor, Rishi Sunak has set out two fiscal tests that would need to be met for ODA spend to revert back to 0.7%:
- First, the government is not borrowing to finance current spending and
- Second, the stock of public debt is falling
As a way to try and silence moral concerns relating to the aid cuts, the vote has been branded by the Leader of the House as a question as to whether ‘the House wishes to see the public finance kept under reasonable control?’
The idea that this is a test of commitment to fiscal responsibility is founded on three myths:
Myth 1: This is a temporary cut to the ODA budget
Although branded a temporary measure, the Chancellor has deliberately set the bar so high that the tests are unlikely to be met. Currently the Office of Budget Responsibility’s March forecasts suggested that the conditions would be met in 2025/26 (although the OBR’s Chairman noted significant spending risks). As Ian Mitchell from Centre for Global Development points out these tests have been met just five times since 1990 (and only once by a conservative government in 2018/19).
Myth 2: Cutting aid now will help put the UK’s public finances on a more sustainable footing
The biggest immediate risk to the UK economy is not the level of public debt, it is the continued threat posed by the Covid-19 pandemic. The payments needed to support households, businesses and public services will continue to grow until the pandemic is fully brought under control around the globe. As the UK Prime Minister has pointed out ‘nobody is safe until everyone is safe’.
Making everyone safe will require increased aid spending in countries who cannot afford to vaccinate their whole populations. The IMF has estimated the costs of ending the pandemic at around £50 billion. In contrast, the benefits to the global economy of ending the pandemic are £9 trillion.
In the longer-term, climate change poses existential risks that also cannot be solved by the UK alone. Asking governments to ‘put cash on the table’ when the ODA budget is being pared back is a tough ask.
UK aid spending can also support the economic recovery in the UK. Previous ODI work has shown that aid spending has increased UK exports and created 12,000 jobs.
Myth 3: The choice is a fiscal necessity rather than a shift in political priorities
At the most recent spending review, when the aid budget was initially cut, the Chancellor also committed to increasing the Ministry of Defence’s capital budget by £5.3 billion by 2022/23. The government is not seeking to cut back its external spending altogether, but rather is opting to shift funds away from ODA towards military equipment.