What is official development assistance?

The Development Assistance Committee (DAC), part of the Organisation for Economic Cooperation and Development (OECD), defines official development assistance (ODA) as grants, loans and other flows that:

  • are provided by official agencies, such as governments;
  • are administered with “the promotion of the economic development and welfare of developing countries” as their main objective; and
  • are offered on terms that are more generous than market rates—for example, grants or “soft” loans.

ODA excludes military aid, peacekeeping and transactions that have primarily commercial interests.

The OECD said that total global ODA was $161 billion in 2020, an increase of 3.5% in real terms from 2019.

What is the 0.7% target?

In 1969, the Pearson Commission, established by the World Bank, recommended a target of 0.7% of gross domestic product (GDP) for donor countries’ ODA “by 1975 and in no case later than 1980”. The then members of the United Nations (UN) adopted the target in a resolution of October 1970. The comparator was subsequently changed from GDP to gross national income (GNI), an alternative measure of the size of the economy.

ODA in the UK

Agreements and legislation

The UK was a party to the 1970 UN resolution.

In 2004, the Labour Government committed to reaching the 0.7% target by 2013, an increase from 0.35% at the time.

In 2005, the then members of the EU, again including the UK, agreed to reach the target by 2015.

In 2006, a private member’s bill that required the Government to report annually on progress towards the target received cross-party support and was passed into law as the International Development (Reporting and Transparency) Act 2006.

The 2010 Coalition Government’s Programme for Government stated that it would honour the 0.7% commitment and enshrine it in law. In fact, the legislation that brought in the target was introduced as a private member’s bill. It became the International Development (Official Development Assistance Target) Act 2015, again receiving cross-party support.

The act requires the Government to ensure the UK meets the 0.7% target for ODA annually. If the target is missed, the Government must lay a report before Parliament that explains why. Such an explanation must, if relevant, make reference to one or more of the following factors:

  • economic circumstances and, in particular, to any substantial change in gross national income;
  • fiscal circumstances and, in particular, the likely impact of meeting the target on taxation, public spending and public borrowing;
  • circumstances arising outside the United Kingdom.

The report must also describe any steps that the Government has taken to ensure that the 0.7% target will be met in the year following the target not being met.

The act states that the Government must make arrangements for the independent evaluation of UK ODA. The Independent Commission on Aid Impact fulfils this role.

UK spending on ODA

As the chart below shows, the UK first reached the 0.7% target in 2013 and remained at that level in each year up to 2020. The sterling value of ODA has tended to rise over that period, reaching £15.2 billion in 2019. On provisional figures, ODA spend fell back to £14.5 billion in 2020 as the economy shrank during the coronavirus pandemic.

Value of UK ODA spending, 2004 to 2020

Graph shows value of UK ODA spending 2004 to 2020 both as a percentage of GNI and in £ billion.

(Organisation for Economic Cooperation and Development, ‘Total flows by donor’, accessed 27 July 2021; and Foreign, Commonwealth and Development Office, Statistics on International Development: Provisional UK Aid Spend 2020, April 2021, p 3. The 2020 figures are provisional).

Reduction to 0.5%

In the November 2020 spending review, the Chancellor of the Exchequer, Rishi Sunak, announced that ODA spend in 2021 would reduce to 0.5% of GNI, equivalent to £10 billion. He said this “tough choice” was necessary because of the economic and fiscal consequences of the coronavirus pandemic.

The March 2021 Integrated Review of Security, Defence, Development and Foreign Policy confirmed this policy and stated that the Government would return to meeting the 0.7% target “when the fiscal situation allows”.

On 12 July 2021, Mr Sunak made a statement that set out the fiscal circumstances that would need to apply. These are:

  • the Government is not borrowing to finance day-to-day spending (excluding spending on investment—also known as a current budget surplus); and
  • underlying government debt (public sector net debt, excluding the Bank of England, as a percentage of GDP), is falling.

The chancellor stated that the Office for Budget Responsibility (OBR) would assess whether the tests had been met, and that they must be met “sustainably”. He also reported that, at the lower level of spend, the UK would be the third largest international aid donor of the seven countries in the G7.

Official economic forecasts

The OBR’s latest economic forecasts, released alongside the March 2021 budget, included estimates from 2020/21 to 2025/26 of the two variables that form the test for restoring ODA spending to 0.7%. These are shown in the table below.

Official forecasts of economic factors affecting the return to the 0.7% ODA target

Variable Test OBR forecasts
2020/21 2021/22 2022/23 2023/24 2024/25 2025/26
Current budget deficit (£ billion) Deficit eliminated 279 172 40 15 3 1
Underlying government debt, excluding Bank of England (% of GDP) Debt falling as % of GDP 88.8 93.8 96.0 97.1 97.0 96.8

(Office for Budget Responsibility, Economic and Fiscal Outlook, 3 March 2021, CP 387, pp 22 and 167)

House of Commons debate

On 7 June 2021, the Speaker of the House of Commons, Sir Lindsay Hoyle, noted that, at that time, the House had not had an opportunity for a “decisive vote” on the ODA reduction. He stated that, because the target was contained in primary legislation, he expected the Government to schedule a debate and “allow the House formally to take an effective decision”.

On 13 July 2021, the day following the chancellor’s statement, the House of Commons debated the proposed approach on a motion that it had considered the statement. At the beginning of the debate, the Speaker said that this form of debate meant the “formal procedural consequences of voting against the motion are limited”. However, he noted the commitment in the chancellor’s statement that, had the motion been defeated, the Government would have returned to meeting the 0.7% target from next year. The speaker concluded that the debate represented a “very significant step forward in the House’s ability to scrutinise the Government’s policy on this important matter”.

In the debate, the Prime Minister, Boris Johnson, said the reduction to 0.5% was “temporary” and necessary because of the increased spending, and debt, arising from the coronavirus pandemic.

The Leader of the Opposition, Keir Starmer, said the Labour Party opposed the change. He argued that international aid “reduces conflict, disease and people fleeing from their homes” and that cutting it was, therefore, a “false economy”. He suggested that, based on the latest OBR figures the current budget surplus test would not be met at any time in the OBR’s forecast period, which runs to 2025/26. Therefore, he argued, the cut was “indefinite”. He called for an immediate return to meeting the 0.7% target.

At the conclusion of the debate, the House approved the motion by 333 votes to 298.

Is new primary legislation required?

There has been debate on whether the Government should bring forward a bill to amend or supersede the International Development (Official Development Assistance Target) Act 2015. In November 2020, when the Chancellor first announced the reduction in ODA, the Foreign Secretary, Dominic Raab, stated the Government “will need to bring forward legislation in due course”. However, in March 2021, the Prime Minister agreed with a questioner who suggested no legislation was necessary because the cut was “strictly temporary”.

Following the chancellor’s statement of 12 July 2021, and the House of Commons debate and vote the next day, the Government confirmed in response to a question in the House of Lords that it did not intend to bring forward primary legislation. It argued that the reduction was “in line with the spirit and framework of the act, which envisages situations in which departure from the 0.7% may be necessary”. In contrast, other members, including Baroness Northover (Liberal Democrat), the minister who took the 2015 legislation through the House of Lords, argued that the action was “totally contrary” to both the spirit and the letter of the act. Lord Garnier (Conservative), a former Solicitor-General, has said that the Government “cannot legitimise a failure to hit the target by announcing in advance its intention to fail”.

UK aid priorities

On 21 April 2021, Mr Raab set out a “strategic shift” in UK aid. He said ODA would address the following priorities:

  • climate and biodiversity;
  • global health security;
  • girls’ education;
  • humanitarian preparedness and response;
  • science and technology;
  • open societies and conflict resolution; and
  • economic development and trade.

The following House of Lords Library briefing contains further information on the allocation of the ODA budget and the impact and significance of UK aid:

External responses

Many organisations working in the development sector have condemned the reduction in the ODA budget. They have suggested that it will, for example: cost lives; increase the prevalence of preventable diseases; reduce the number of children gaining a good education; and decrease the UK’s influence overseas (‘soft power’).

Examples of responses from aid organisations and development thinktanks include:

However, a November 2020 opinion poll for YouGov reported that two-thirds of Britons supported cutting the foreign aid budget. Previously, the academic Sebastián Edwards stated that some economists believed foreign aid spending was ineffective and has actually caused harm to poorer countries. They argue it can create dependency, foster corruption and lead to over-valued currencies.

Committee inquiry

The House of Commons International Development Committee is conducting ongoing scrutiny into the changes to the UK aid budget, including the cut in the ODA target. Witnesses in the most recent sessions, in April 2021, have included the Foreign Secretary and senior Foreign, Commonwealth and Development Office officials and representatives of research organisations and thinktanks,

What next?

Baroness Ritchie of Downpatrick (Non-affiliated) has tabled the following question for short debate in the House of Lords:

To ask Her Majesty’s Government what steps they will take to ensure the overseas development aid budget is retained at 0.7 percent of gross national income in (1) this financial year, and (2) future financial years.

The debate is scheduled to take place in the House of Lords on Wednesday 27 October 2021.

Read more

This article was first published on 4 August 2021. It was updated on 13 October 2021 to include the date the debate is scheduled to take place in the House of Lords.

Image by nforngwa from Pixabay.