Would a lower foreign aid target be so bad?

Whatever happened to David Cameron’s promise to spend 0.7 per cent of GDP on foreign aid?    Amid much criticism, it survived Cameron and Osborne’s (failed) efforts to bring the public finances back into balance. Then, following Covid, the then-Chancellor Rishi Sunak cut the target to 0.5 per cent, saying that it would be restored to 0.7 per cent once the government was no longer having to borrow money to fund day-to-day spending.

But could it be reduced further still in the Autumn Statement? That is what some fear. Indeed, it has been argued that Britain’s overseas aid budget has already dropped to far lower than 0.5 per cent of our national output. Stefan Dercon, professor of economic policy at Oxford University’s Blavatnik School of Government, argues that when you take subtract the £3 billion of the £11 billion aid budget being spent housing refugees physically within Britain, we are spending only 0.3 per cent of Gross National Income (a slightly different measure from GDP) on aid.

Is it really unreasonable to count money spent helping refugees physically housed within Britain as aid spending? It depends, perhaps, what you call it. If you call it ‘overseas aid’ as many people do for shorthand, then it might seem odd to spend it in Britain. But the government tends to use the term ‘international aid’ and the UN and OECD uses Official Development Assistance (ODA). Neither of the latter two terms would seem to exclude money spent on helping refugees living in Britain.  Indeed, the definition of ODA used by the OECD explicitly includes the housing provided to foreign refugees and asylum-seekers in their first year living on home soil  – although it excludes money spent on security and repatriation costs. 

Indeed, if the government did set itself a target for aid spending which excluded housing of refugees in Britain it would give itself a perverse incentive to ship refugees abroad, or to refuse to transfer refugees currently living in overseas camps to Britain. This would be specifically so that it could then count them as part of its international aid budget. I don’t think that critics of the government’s migration policy would really want a situation where housing asylum-seekers in British homes or hotels did not count as international aid spending but housing people in Rwanda did.     

But then the whole debate over the 0.7 per cent target ignores a more fundamental objection. When you define spending money as an achievement in itself, you guarantee that much of it will be wasted. Set yourself a target for spending a certain amount of money by a certain date and the temptation will be to shovel as much money through the door as quickly as possible so that you can celebrate reaching the target. That was what happened when David Cameron first applied his target in 2013. Half a billion pounds was sent to the Geneva-based Global Fund (whose 150 staff were being paid an average of £130,000 a year) just days before the cut-off date for reaching the 0.7 per cent target.   

A lower aid target might just be what we need to prevent waste. The government could, of course, always set a budget that is bigger than the target – and only spend money if it can be sure that it is being spent wisely.