Donor Profile: UK

Last updated: December 21, 2022

Summary



ODA Spending


ODA in Context


The UK is the fourth-largest ODA donor country in absolute terms in 2021.


This represented 0.5% of its GNI and made the UK the ninth-largest donor in relative terms.




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%) because of the negative economic impacts of COVID-19.


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 former Chancellor of the Exchequer, Rishi Sunak, committed to making a decision in the Autumn 2022 budget as to whether the fiscal tests would be met and UK ODA can return to 0.7% ODA/GNI.

The UK government’s fiscal and economic projections assume the UK will not meet these two tests between 2022 and 2027, and Chancellor of the Exchequer Jeremy Hunt’s November 2022 ‘Autumn Statement’ assumed the ceiling would remain until 2028.



ODA Breakdown

The UK channels US$12.4 billion of its ODA bilaterally, accounting for 64% of its total ODA in 2020 (including US$3.4 billion in earmarked funding through multilaterals, which is reported as bilateral funding). This is above the OECD DAC average of 58%. 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 26% decline in funding, according to FCDO provisional data.


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 £8 billion (US$10.3 billion) in public and private sector financing for international projects by 2025.



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.


NGOs and CSOs implemented US$2.1 billion or 17% of the UK’s bilateral programs in 2020, in line with the DAC average of 19%. CSOs in the UK play a strong role in implementing development funding and shaping the UK’s development agenda.


The largest share (23%) of bilateral ODA in 2020 went to SSA; this is close to the DAC average of 24%. Cooperation with Africa is a strategic objective of the UK, 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 13%.



Multilateral Spending and Commitments


The UK provided 36% of its total ODA as core contribution to multilaterals in 2020, up from 32% in 2019. This is below the DAC average of 42%. The largest recipients of the UK’s core contributions to multilaterals in 2020 were the EUI (US$1.9 billion or 27%), the World Bank (US$1.3 billion or 18%), the IMF (US$1.1 billion or 15%), UN organizations (US$747 million or 11%), and regional development banks (US$305 million or 4%). Of the US$9 billion spent bilaterally, the UK channels US$1 billion or 8% 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.




Unless otherwise indicated, all data in this section is based on the cash-flow basis measurement system. For more information, see our Donor Tracker Codebook.

For more granular and up-to-date development finance data on the UK, including information on where and in which sectors it is spending both ODA and non- ODA funds, please consult the IATI d-portal. IATI is a reporting standard and platform on which organizations and governments voluntarily publish data on their development cooperation.



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 but also has a seat in the UK Cabinet. 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/defense policy priorities over the next ten years. In May 2022, the UK government published a new international development strategy that is framed by the Integrated Review and aims to integrate UK development policy with the UKs wider, defense, and security efforts in the coming years. At its core is a focus on trade and economic development.


While the UK officially left the European Union 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 £8 billion (US$10.3 billion) a year by 2025 in UK-backed financing for low-income countries 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 £3 billion (US$3.9 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 £11.6 billion (US$15.6 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.

READ MORE

UK’s ODA to Climate Change

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 low-income countries and supporting the global goal of providing at least 0.2% of GNI to LDCs.


Asia: Beyond priority countries noted in the ‘Integrated Review', 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’ (SIDS) strategy works to advance qualifying nations to be economically sustainable and climate resilient.


Indo-Pacific: The May 2022 international development strategy signals a tilt towards building critical development partnerships in the Indo-Pacific.


Ukraine: The UK's May 2022 development strategy highlights the centrality of European security to UK interests. To this end, the UK has donated £3.8 billion (US$4.9 billion) in military and economic support to Ukraine, as of June 30, 2022. It is likely that support to Ukraine will increase as the conflict continues.


Political Outlook


In the past decade, the UK experienced an unprecedented 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 £1 billion (US$1.2 billion) in FY2022/23 and a further £1.5 billion (US$1.8 billion) in FY2023/24 to help meet the escalating costs of supporting refugees within the UK.


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 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. Most direct intergovernmental engagement for the FCDO is with the BEIS; responsible for some of the UK’s ODA related funding for climate change and R&D and the DHSC which manage 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).


BEIS and the Home Office were the two largest non- FCDO provider of ODA in 2021, accounting for 8% of all funding each, followed by the cross-departmental CSSF (4%), and DHSC (2%).


The FCDO spent £8.2 billion (US$9.9 billion) on ODA in 2021, according to UK government statistics. It is planning to spend £7.6 billion (US$9.8 billion) in FY2022/23 and is assuming the same level of spending for FY2023/24. The UK government released an Autumn Statement in 2022 outlining the UK’s fiscal plans up to FY2025/26.


From FY2020/21 to FY2021/22, Global Funds Department program funding fell by 8% from US$1.3 billion to US$1.2 billion. This was a small cut compared to other FCDO budget lines and exceeded the anticipated budget for the department, which was projected to be £875 million (US$1.1 billion). Larger cuts were made to the ‘Education, Gender and Equality;’ ‘Energy, Climate and Environment;’ ‘Humanitarian;’ and ‘International Finance’ programs. Meanwhile, the ‘Health’ and ‘Economic Cooperation and Growth’ programs expanded. The ‘Health’ budget line grew approximately US$50 million in FY2021/22, resulting from the inclusion of the Health Directorate Central and Vaccines, Therapeutics and Diagnostics budget lines under the ‘Health’ umbrella. The ‘Economic Cooperation and Growth’ program grew almost five-fold from US$78 million in FY2020/21 to US$431 million in FY2021/22.



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. In 2019 and 2020, the government conducted one-year ‘Spending Rounds’ due to the economic uncertainty of Brexit and then the COVID-19 pandemic.


The last multi-year CSR in 2015 coincided with the creation of the UK’s previous global development strategy and contained explicit targets drawn from the strategy that DFID and other parts of the UK government committed to delivering within the CSR period. The CSR for 2021 was announced in October 2021 alongside the Autumn Budget. It was the first multi-year CSR since 2015.


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.

Issue Deep-Dives

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Adam Jennison

ajennison@seekdevelopment.org

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