Major shifts in UK aid spending as global development faces unprecedented challenges

26 Feb 2025

• Independent Commission for Aid Impact (ICAI) sets out the current picture on UK development as Prime Minister announces reduction in aid spending target to 0.3% of national income. 

• Aid spending on refugees in the UK rose from £628 million in 2020 to £4.3 billion in 2023. 

• UN Sustainable Development Goals off-track as conflict, climate change and extreme poverty have become increasingly interconnected. 

• Ukraine has become top recipient of UK aid since the full-scale Russian invasion. 

UK aid is being spent in an increasingly challenging global context, with extreme poverty concentrated in places severely affected by conflict and climate change, a new report finds today (Wednesday 26 February). 

The Independent Commission for Aid Impact (ICAI) outlines how the UK’s international development spending has undergone substantial changes, with major budget reductions, competing crises and global turbulence since 2020. The report comes as the Prime Minister announced yesterday that the aid spending target will reduce further in 2027 from 0.5% of gross national income (GNI) to 0.3% to fund increased spending on defence. 

The UN sustainable development agenda is significantly off-track worldwide, with none of the UN Sustainable Development Goals (SDGs) likely to be achieved by 2030. ICAI’s report, How UK aid is spent, puts the UK’s recent spending levels and trends in resource allocation in the global context. It notes that major trade-offs will continue in the current challenging economic and geopolitical climate, as the government sets strategic priorities and makes choices about how much, where and how to allocate resources in 2025 and beyond. 

With a third of UK aid being spent in the UK in 2023, primarily due to the costs of housing refugees and asylum seekers, the aid watchdog finds questions remain as to how much will be available in future years to support development overseas. 

Jillian Popkins, ICAI Chief Commissioner, said:   

“The global aid landscape has never been more challenging. With so many competing priorities, against a backdrop of global economic and political turbulence, effective oversight of UK aid spending is crucial, especially as the government looks to make further reductions while aiming to play a globally significant role. 

“As an independent scrutiny body, ICAI plays a vital role in ensuring aid delivers maximum impact for those who need it most and ensures the UK taxpayer gets value for money. Our findings will help inform better decision-making as the government shapes its international development strategy for the years ahead.” 

The amount of UK official development assistance (ODA) that is spent within the UK, rather than overseas, has sharply risen in recent years. In 2020, £628 million was spent in the UK supporting refugees and asylum seekers, rising to £4.3 billion in 2023, the most recent year for which figures are available. This represents 28% of the total aid budget, or 43% of bilateral aid (funding provided for a set purpose, such as for specific projects, in one or more developing countries).  

Under international aid rules, some of the first-year costs associated with supporting refugees and asylum seekers who arrive in the UK qualify as ODA, the rationale being that funding basic services and accommodation for refugees is a form of humanitarian assistance, wherever they are located. 

ICAI found this rise in domestic spending, coupled with reductions to the aid budget since 2020, has significantly impacted traditional aid programmes. It reports that funding directly to developing countries has fallen from £5.9 billion in 2019 (57% of bilateral aid) to £2.7 billion in 2023 (27%), with allocations to individual country partners reduced suddenly.  

The ranking of countries receiving UK bilateral aid has remained fairly stable in recent years – with Ethiopia, Afghanistan, Syria, Somalia and Pakistan among the current top ten. However, Ukraine became the top recipient of UK aid in 2023, following the 2022 full-scale Russian invasion. 

The humanitarian aid budget was reduced by half in 2021, from £1.5 billion to £743 million, the report adds. It has partially recovered since then, as the UK has responded to humanitarian crises in Ukraine, Afghanistan and Sudan. However, ICAI adds that there were fewer resources for other long-running crises, such as in Syria and Yemen. 

ICAI identifies several key priority areas receiving continued support from the UK. It notes the growing importance of UK development finance, particularly through British International Investment (BII), the UK’s development finance institution, which invests in businesses in emerging markets and other developing countries.  

The report also notes the UK has reaffirmed its substantial climate finance commitment of £11.6 billion over the five-year period to 2025-26 – much of which needs to be spent in the final year – and notes that this may lead to other development priorities being displaced. 

Shifts in the UK’s spending priorities have taken place against a challenging global backdrop, according to the report, where development progress has slowed and conflict, climate change and extreme poverty have become increasingly interconnected.  

Less than 20% of the UN Sustainable Development Goals are on track for achievement by 2030, and 73% of people in extreme poverty live in areas affected by both conflict and climate change, a figure expected to rise to 86% by 2030.  

ICAI also notes that, while ODA represents just a small share of global development finance, it is vital for low-income countries and those affected by conflict and fragility. It highlights that, as of 2023, developing countries are collectively repaying more to international lenders than they receive in new funding, leading to a growing debt crisis. 

The report summarises where the UK is allocating resources at the start of ICAI’s new Commission, which is set to run until 2029.  It provides an evidence base to inform the focus of ICAI’s future work and a baseline against which ICAI can track the UK’s resource allocation against its international development objectives.