UK

Summary

ODA Spending

ODA in Context

The UK is the fourth-largest ODA donor country in absolute terms in 2021. 2022 preliminary data shows that the UK has fallen to the fifth-largest donor, just behind France.

The UK was the eighth-largest donor in relative terms in 2021, with total ODA representing 0.5% of its GNI. In 2022, there was a marginal increase to 0.51% ODA/GNI.

ODA Trends

ODA volumes fell by 22% in 2021 as the UK government decided to temporarily provide ODA equivalent to only 0.5% of GNI, down from the legally enshrined 0.7%.

The reduction to 0.5% ODA/GNI will be maintained until two fiscal tests are met:

1. No government borrowing for day-to-day spending according to the OBR, and
2. A falling ratio of underlying government debt to GDP.

The UK government’s fiscal and economic projections made in 2022 Autumn Statement assume the UK will not meet these two tests between 2023 and 2027, and has estimated an ODA budget of around 0.5% until then.

In April 2023, the FCDO released its Provisional UK Aid Spend 2022, which noted that the UK provided GBP12.8 billion ( US$15.7 billion) in ODA in 2022, in line with the above OBR projections. The OECD's 2022 preliminary data also reflects the US$15.7 billion UK ODA spend in 2022, showing an increase from 2021, in line with increases in GNI and the government's 0.5% ODA/GNI target. Much of this increase came from a 266% increase in the UK's in-donor refugee costs, jumping from US$1.2 billion in 2021 to US$4.5 billion in 2022, which equates to 29% of total ODA. Although some additional provision was made in November 2022’s budget to offset part of these refugee costs, this came late in the year, meaning ODA rose only to 0.51%. This means that excluding in-donor refugee costs, ODA volumes and ODA/GNI ratio fell according to the 2022 OECD DAC preliminary data.

Of the projected total ODA above, FCDO ODA spending is due to rise in FY2023-2024 by 7%, or GBP503 million ( US$620 million), from GBP7.5 billion ( US$9.2 billion) in FY2022-2023 to GBP8.1 billion ( US$10 billion) in FY2023-24.

ODA Breakdown

The UK channels US$10 billion of its ODA bilaterally, accounting for 61% of its total ODA in 2021, including US$1.9 billion in earmarked funding through multilaterals. This is above the OECD DAC average of 59%. Despite the focus on bilateral spending, most of the cuts from the ODA reduction in 2021 came out of the UK’s bilateral programs, which saw a 27% decline in funding, according to FCDO provisional data. Despite this drop, bilateral funding bounced back to 74% of total ODA in 2022, the highest bilateral percentage share of UK ODA to date. This marked a 32% increase from 2021 levels and was driven by the large increase in in-donor refugee costs.

The UK disburses almost all its ODA as grants rather than concessional loans. It indirectly provides equity, debt, and intermediated equity to private sector companies through capital funding to its development finance institution, BII, formerly the CDC Group. The government said that BII will help mobilize GBP8 billion ( US$11 billion) in public and private sector financing for international projects by 2025. BII’s projected budget for 2022-2023 will be GBP290 million ( US$399 million).

Bilateral Spending

Reflecting its strategic priorities, the UK focuses a significant share of its bilateral ODA on humanitarian assistance and global health, and increasingly, toward in-donor refugee costs in the wake of compounding global crises. According to the FCDO’s Provisional UK Aid Spend 2022, in-donor refugee costs jumped from GBP1.1 billion ( US$1.5 billion) in 2021 to GBP3.7 billion ( US$4.6 billion) in 2022, the largest yearly increase in in-donor refugee costs for the UK to date.

In spite of the focus on bilateral spending, bilateral FCDO ODA spending is scheduled to take a 13% hit in FY2023-2024, down by GBP320 million ( US$394 million).

NGOs and CSOs implemented US$1.5 billion, or 15%, of the UK’s bilateral programs in 2021, in line with the DAC average of 17%. CSOs in the UK play a significant role in implementing development funding and shaping the UK’s development agenda, relative to other donors. Additionally, of the US$10 billion spent bilaterally, the UK channels US$1 billion, or 10% of ODA, through private sector institutions, above the DAC average of 4%. The large share of funding through private sector institutions reflects, in part, the UK’s reliance on private sector contractors and consultants to carry out project implementation.

The largest share (22%) of bilateral ODA in 2021 went to SSA; this is close to the DAC average of 24%. In addition, Africa received the largest share of FCDO’s region-specific ODA in 2022 at GBP1.1 billion ( US$1.4 billion), though this was a reduced amount compared to the GBP1.4 billion ( US$1.9 billion) spent by the FCDO in 2021. Funding for West and Southern Africa is slated for a further 26% reduction in FCDO FY2023-2024 ODA spending. Despite these cuts, cooperation with Africa remains a UK strategic objective, and future ODA flows are expected to focus on supporting prosperity and enhancing security. Asia received the second-largest share (12%), also near the DAC average of 14%. While the FCDO has expressed a desire to focus more heavily on the Indo-Pacific region, the FCDO plans to reduce its FCDO investment in Southeast Asia and the Pacific by 27% in FY2023-2024.

Multilateral Spending and Commitments

The UK provided 40% of its total ODA as core contributions to multilaterals in 2021, up from 36% in 2019. This is in line with the DAC average of 41%. The largest recipients of the UK’s core contributions to multilaterals in 2021 were the EUI (US$1.8 billion or 28%), the World Bank (US$1 billion or 16%), the IMF (US$906 million or 16%), UN organizations (US$719 million or 11%), and regional development banks (US$341 million or 5%).

Multilateral spending by the UK is expected to increase significantly over the next fiscal year, from GBP3.3 billion ( US$4.1 billion) in FY2022-2023 to GBP4 billion ( US$5 billion) in FY2023-2024.

Politics & Priorities

Political Context

The UK is a parliamentary democracy under a constitutional monarchy where the monarch, currently King Charles III, is the head of state and the Prime Minister is the head of government. Powers reserved for national government are shared between the Prime Minister and his government and parliament. The two dominant parties are the Labour and Conservative parties.

The current prime minister Rishi Sunak (Conservative Party), who took office in October 2022, exercises significant influence over development policy, for example through making funding commitments for international initiatives. All large funding announcements must be approved by the Prime Minister’s Office; however, in practice, the Prime Minister’s degree of involvement varies.

The FCDO, created through a merger of the DFID and the FCO, was established in September 2020. It leads on strategy setting and funding decisions on the UK’s development policy and is led by UK Foreign Secretary James Cleverly. There is also a Minister of State for Development and Africa that reports to the Foreign Secretary who also has a seat in the UK Cabinet and National Security Council. The post is currently held by Andrew Mitchell. Due to the merger, at the recipient country level, all former DFID staff now report to the UK Ambassadors who lead all UK foreign and development work in-country. The May 2022 International Development Strategy commits to giving UK Ambassadors and High Commissioners greater control over decision-making and speeding up UK program delivery time.

Main Actors

Development Priorities

In 2021, the UK published its Integrated Review of Security, Defence, Development and Foreign Policy, which sets out a high-level strategic framework to guide UK’s foreign, development and security and defense policy priorities over the next ten years. In May 2022, the UK government published a new development strategy, which was framed by the Integrated Review, and aims to integrate UK development policy with the UK’s wider defense and security efforts in the coming years. At the strategy’s core is a focus on trade and economic development.

In 2023, the UK Government published a refresh of its Integrated Review considering the evolving geopolitical situation. Tackling climate change and protecting biodiversity remain the core thematic priorities for the UK government, but supporting the SDGs and addressing poverty are now additional key priorities. The refresh also identified seven new international development campaign priorities for 2023 that follow priorities set out in the 2022 International Development Strategy:

• Reforming and greening the global financial system to ensure the International Financial Institutions;
• Championing global efforts to make global tax systems fairer and ensure that revenues and assets lost to illicit finance are identified and recovered;
• Delivering clean, green infrastructure and investment;
• Leading a campaign to improve global food security and nutrition;
• Leading a global campaign on “open science for global resilience;”
• Catalyzing international work to prevent the next global health crisis; and
• Coalescing a collective response to the accelerating, well-financed and organized attacks on the rights of women and girls.

While the UK officially left the EU in January 2020 and finalized its formal transition period in January 2021, the new development strategy additionally highlights the need for shared security goals and increased development partnerships and investments between the UK and the EU. The strategy mentions the development of “architecture that will underpin future European security” and the need to “build those economic and social freedoms which will underpin lasting resilience of societies and economies,” emphasizing economic and social stability as the core of long-term regional assistance. Looking further afield, the current government continues to seek shared development approaches with the EU on immigration and humanitarian assistance. The FCDO will continue to contribute to EU development programs approved before December 31, 2020, in decreasing amounts until FY2029/30, as determined in the Withdrawal Agreement. A large part of the decline in multilateral assistance will be accounted for by this steady decline in funding to EU development programs.

By issue

The UK's development strategy’s four key focus areas are:

• Supporting economic development through British Investment Partnerships: Partnerships are aimed at delivering honest and reliable investments to partner countries and the strategy commits the UK to mobilize GBP8 billion ( US$11 billion) a year by 2025 in UK-backed financing for LICs both from the private sector and beyond.
• ‘Providing women and girls with the freedom they need to succeed’: The strategy focuses on three key areas in advancing gender equality: 1) education, 2) empowerment, including a commitment to addressing SRH and supporting WEE, and 3) ending violence.
• Delivering humanitarian leadership: The strategy commits the UK to provide GBP3 billion ( US$3.7 billion) in humanitarian assistance over the next 3 years and to use its diplomatic strengths to continue to reform the international system to be more proactive in anticipating and managing future humanitarian crises.
• Tackling issues tied to climate change, nature, and global health: The strategy reiterates the UK’s commitment to double its contribution to international climate finance to at least GBP11.6 billion ( US$14.3 billion) between 2021-2026 and commits to ensuring that this funding is equally split between mitigation and adaptation finance. The strategy also commits the UK to ensuring all new bilateral ODA is aligned with the Paris Agreement. For global health, the strategy focuses on supporting the COVID-19 response and preparing for the next pandemic, strengthening health systems, integrating the ‘One Health’ approach, ending preventable deaths of mothers, babies, and children; and improving R&D.

READ MORE

UK’s ODA to Global Health

UK’s ODA to Gender Equality

UK’s ODA to Climate Change

Neither agriculture nor education are major priorities for UK; however, both issues are considered components of the UK’s support for countries’ advancement on climate and gender equality, respectively. Education is particularly highlighted within the International Women and Girls’ strategy, which was published in March 2023.

READ MORE

UK’s ODA to Agriculture

UK’s ODA to Education

By region

Africa: Cooperation with Africa is a strategic objective of the UK, and future ODA flows are expected to focus on supporting prosperity and enhancing security. The UK's 2022 strategy states that the UK will sustain its commitments in Africa with a particular focus on South Africa, Nigeria, Ethiopia, Kenya, and Ghana. The strategy also commits to channeling the majority of UK ODA toward LICs and supporting the global goal of providing at least 0.2% of GNI to LDCs. According to the FCDO, Africa received the largest share of FCDO’s region-specific ODA in 2022 at GBP1.1 billion ( US$1.5 billion), though this was a reduced amount compared to the GBP1.4 billion ( US$1.9 billion) spent by the FCDO in 2021. Funding for West and Southern Africa is set for a further 26% reduction in FCDO FY2023-2024 ODA spending.

Asia: Beyond priority countries noted in the Integrated Review and its 2023 refresh, the new strategy mentions the UK-India and UK-Indonesia Roadmaps, which outline comprehensive, strategic bilateral partnerships with the two countries through 2030. In addition, the 2030 Small Island Developing States strategy works to advance qualifying nations to be economically sustainable and climate resilient. In 2022, Asia received GBP938 million ( US$1.2 billion) in total region-specific bilateral ODA from the FCDO, down from GBP1.1 billion ( US$1.5 billion) in 2021. In addition, major development partners to the UK, Afghanistan and Pakistan, are scheduled for a 53% reduction in FCDO funding in FY2023-2024.

Indo-Pacific: The May 2022 International Development Strategy signals a tilt towards building critical development partnerships in the Indo-Pacific. According to the Provisional UK Aid Spend 2022, the Pacific region received a 33% percent bump from 2021 to 2022 in region-specific bilateral ODA spend from the FCDO, but plans to reduce its FCDO investment in Southeast Asia and the Pacific by 27% in FY2023-2024.

Ukraine: The UK has committed GBP2.3 billion ( US$2.8 billion) in military support for Ukraine in 2022 and has made available up to GBP3.5 billion ( US$4.3 billion) of UK Export Financing capacity to support UK exports to Ukraine, which includes up to GBP2.3 billion ( US$3.2 billion) to support Ukrainian defense capabilities.

The UK has also provided GBP1.5 billion ( US$1.8 billion) of economic and humanitarian support and around GBP1.3 billion ( US$1.6 billion) in fiscal support, including loan guarantees to support Multilateral Development Banks. On top of bilateral ODA to Ukraine, the UK also launched the International Ukraine Support Group with Canada and the Netherlands in March 2022, to bring together global partners committed to providing sustained support for Ukraine. The group aims to ensure that there is long-term assistance to Ukraine by coordinating and encouraging regular financial support from partner countries.

Political Outlook

Since 2019, the UK has experienced a period of political and economic turbulence which has taken a toll on the UK’s global leadership on international development both in policy and financial terms.

The current Conservative government was elected to power with a majority in December 2019 following a general election. However, between 2019 and 2022 the government has been led by three different Prime Ministers and three different Secretaries of State for Foreign Affairs. According to Conservative Party rules, Conservative MPs and party members elect the leader, not the general public. Rishi Sunak was elected as the new prime minister in October 2022. Sunak’s government committed to following the development priorities set out in the May 2022 International Development Strategy and is committed to increasing ODA to 0.7% of GNI when the fiscal situation allows.

The UK government’s 2022 Autumn Statement assumed that the UK’s ODA budget will remain near 0.5% of GNI until 2028 and lifted the temporary freeze on non-essential ODA spending.

The statement also committed to providing an additional GBP1 billion ( US$1.2 billion) in FY2022/23 and a further GBP1.5 billion ( US$1.8 billion) in FY2023/24 to help meet the escalating costs of supporting refugees within the UK. According to the FCDO’s Provisional UK Aid Spend 2022, in-donor refugee costs jumped from GBP1.1 billion ( US$1.5 billion) in 2021 to GBP3.7 billion ( US$4.6 billion) in 2022, the largest yearly increase in in-donor refugee costs for the UK to date.

The freeze on non-essential ODA was imposed by former Prime Minister Boris Johnson in July 2022, due to concerns that the escalating in-donor refugee costs could lead to a breach of the UK’s 0.5% ODA/GNI target.

Budget

Budget breakdown

According to the UK government, the FCDO provided 72% of total UK ODA in 2021, down from the 78% managed by the former DFID and FCO in 2016. This decreased even further in 2022, down to 60% of total UK ODA, the smallest share of FCDO ODA to date. This is part of a deliberate effort to promote cross-government allocation of ODA which presents increasing avenues to shape UK development efforts through engagement with actors outside of the FCDO. In 2022, most of the non- FCDO spending came from an increase in spend on in-donor refugee support by a number of other departments. Most direct intergovernmental engagement for the FCDO is with the former BEIS (now split into three new departments: the Department for Science, Innovation, and Technology; the Department for Energy Security and Net Zero; and the Department for Business and Trade), responsible at the time for some of the UK’s ODA -related funding for climate change and R&D, and the DHSC, which manages some ODA funding for anti-microbial resistance surveillance, research into vaccines for diseases with epidemic potential, and health research for low- and middle-income countries.

Former BEIS and the Home Office were the two largest non- FCDO providers of ODA in 2021, with the Home Office accounting for 9% of all funding, due to the increasing use of ODA funding to support housing refugees in the UK, and the former BEIS, which was responsible for 8%. These two departments were followed by the cross-departmental CSSF (4%) and DHSC (2%).

The UK government announced the FCDO ODA allocations for FY2023-2024, seeing an increase in FCDO spending towards ODA from GBP7.5 billion ( US$9.2 billion) in FY2022-2023 to GBP8.1 billion ( US$10 billion) in FY2023-24, a 7% total increase.

Looking at bilateral ODA spending shifts from FY2022-2023 to FY2023-2024, spending from the FCDO on global health and COVID-19 will take the largest hit, with a 28% decrease in funding from GBP58 million ( US$71 million) to GBP42 million ( US$52 million). Education, gender, and equality spending also will take a hit of 14%, or GBP13 million ( US$16 million). Open Societies and human rights; international finance; technology and analysis; and energy, climate and environment budget lines will all see increases. In addition, BII is expected to receive a 104% increase in funding from GBP53 million ( US$65 million) to GBP108 million ( US$133 million).

Budget Process

The UK budget process usually begins with the CSR, which sets medium-term expenditure limits for government departments for the following three to five years and is led by the UK Treasury. The CSR development process is an important opportunity to shape the UK’s overall long-term funding levels for development.

The CSR for 2021 was announced in October 2021 alongside the autumn budget. It was the first multi-year CSR since 2015, due to the economic uncertainty of Brexit and the COVID-19 pandemic.

From FY2019/20, the UK intends to have a single ‘fiscal event’ each year, i.e., an annual budget in October/November. The annual process is structured as follows:

• Release of Spring Statement: In April, the UK’s OBR releases its Spring Statement, providing an assessment of the UK’s economic and fiscal outlook. The Chancellor begins initial policy consultations on budget proposals for the upcoming fiscal year.
• Chancellor presents the budget to Parliament: Usually in October/November, the Chancellor presents the annual budget to Parliament. The budget proposals do not include detailed budget lines for individual departments and, therefore, do not have a significant impact on ODA-related funding or policy decisions.
• Parliament debates and adopts the annual budget: In approximately October and April, Members of Parliament debate the budget resolutions and scrutinize the budget. A Finance Bill is introduced which aims to be passed by Parliament before the fiscal year begins in April.
• FCDO adjusts budget based on budget speech: FCDO begins annual RAR to adjust allocations of its annual budget to align with the budget ceiling set by the Chancellor.