Daniel Ferrell-Schweppenstedde

Former Policy and Public Affairs Manager

Charities Aid Foundation

Why the aid budget should be restored to 0.7%

11 November 2022

Those working in international development and their supporters will be looking at the Autumn Statement next week for an indication that the Government intends to increase foreign aid in the near future. Returning to the original goal of keeping spending at 0.7% of Gross National Income seems to become increasingly long-term goal, given the current economic climate and additional pressures on the public purse.

As Chancellor, Rishi Sunak announced in the 2021 Autumn Budget that the reduction from 0.7% to 0.5% would be reversed in 2024-25. But while the Government set out a pathway for returning to 0.7%, there have recently been rumours that overseas aid could be under further threat to reduce public spending. A move that CAF – which works with aid charities of all sizes in the UK and abroad – and many others would oppose.

It is encouraging that before his appointment to Development Minister, Andrew Mitchell MP spoke passionately about the importance of international aid for Britain’s reputation at our event at the Conservative Party Conference. Having a robust UK aid budget is increasingly critical given the rise in global challenges and the UK’s need to flex its soft power in a drastically changed international context.

UK aid is needed more than ever before. Covid, conflict and climate shocks have complicated the global challenges we face and as a result, human development is regressing. For the first time in 38 years, the UN Human Development Index has decreased twice in a row. Specifically, the devastating conflict in Ukraine has exacerbated global hunger. It is estimated that since 2019 the number of those facing acute food insecurity has soared - from 135 million to 345 million. A total of 50 million people in 45 countries are teetering on the edge of famine according to the World Food Programme.

Beyond making the moral case, there are economic arguments for increasing foreign aid and how it can impact growth. Aid delivers good value for money in terms of the macro- economic effects it produces as shown by the National Institute of Economic and Social Research (NIESR). They found that every £1 spent on aid delivers at least triple its value in the recipient regions. Aid also has positive spill-over effects and can deliver a positive return to donor countries when well-directed. It is estimated that if ODA were restored imminently, it would raise UK output by 1-13 pence for every pound spent.

It is also in the national interest to spend on aid. The UK has a proud history of being a world leader in international development, with our work benefitting millions of people around the world, and at home. In 2020, the UK donated over £200m to the Coalition for Epidemic Preparedness Innovations (CEPI), which was key to the research and development of vaccines, including for Covid-19.

We therefore need a fixed timeline to bring ODA back to 0.7%. The established fiscal tests can still work as a guardrail but should not act as barrier. This new commitment could also provide a platform to make a new credible ask for private funders to align their agendas to support countries in need and contribute to fulfilling the UN’s Sustainable Development Goals.

The role of philanthropy

Philanthropy plays a crucial role in addressing the global challenges we face by committing resources and funding innovative approaches to solving global issues. But even mega donors like the Gates Foundation have pointed out that individual philanthropy is not a match for government aid from high- income countries.

The UK aid budget needs to be robust to tackle the growing problems around the world, but the Government can play a role to incentivise philanthropy and unlock its potential. Through its convening power, recognising complementary efforts and offering partnerships to leverage resources, Government can tap into global efforts and connect them with national aid agendas and mobilise stakeholders. Blueprints for this already exist.

Take for example the SDG Philanthropy Platform led by the UN Development Programme and WINGS. It provides a forum for ‘match-making’ between interested partners for multi-stakeholder partnerships to mobilise resources towards the SDGs. Blended finance options can also use

development finance with philanthropic funds to mobilise private capital flows to emerging and frontier markets. The UK is already partnering on UNDP Sustainable Finance Hub to resolve bottlenecks that prevent private funds from being deployed to address the SDGs. Philanthropy can play various roles in here: reducing risks, providing incentives for private finance to come on board, or providing technical assistance.

The regulatory framework could also be made easier and more transparent for donors who want to give across borders from the UK. The current complex sets of rules and requirements can be especially burdensome for repeat donations. Introducing a UK-style framework inspired by the US process of ‘equivalency determination’ - which requires the receiving foreign charity to be of equivalent status - could provide another regulatory tool to ease cross-border giving.

Historically, the UK has been influential in setting the global aid agenda, including the 2030 Agenda for Sustainable Development and 17 Sustainable Development Goals. In fact, the UK pushed for commitments on gender equality, peace and security. The UN’s new Common Agenda  sets out a plan of action for improved global cooperation to accelerate towards the achievement of the SDGs. One of the commitments made is to Leave No One Behind, which the UK was instrumental in developing.

Government can, and should, reconnect with this legacy. It can reaffirm its commitment by getting aid back on track and bring stakeholders, including philanthropy, together to create projects which are strategic, mutually beneficial and aligned in outcomes across sectors.

Community charity

Stay connected and informed

Receive our charity newsletter

Subscribe to receive email updates with latest news, funding and financing resources.

Sign up now