Terms of reference for ICAI review on management of the ODA spending target

1. Overview

In July 2005, the UK pledged to spend 0.7% of gross national income (GNI) as official development assistance (ODA) annually by 2013. The UK achieved this target in 2013 and made it a legislative commitment in 2015 through the International Development (Official Development Assistance Target) Act 2015. 

In 2020, the impact of COVID-19 on the UK economy resulted in a sharp fall in projected GNI. The government therefore undertook unprecedented steps to reduce its planned aid expenditure in-year, to avoid exceeding the 0.7% target. In November 2020, the then foreign secretary, Dominic Raab, announced the UK would temporarily reduce the spending target to 0.5% GNI, due to the impact of the global pandemic on the UK economy. At the same time, government expenditure on support to refugees and asylum seekers in the UK increased, sharply reducing ODA available for spending overseas. 

In February 2025, Prime Minister Keir Starmer announced that the UK would reduce its ODA budget from 0.5% to 0.3% of GNI in 2027. The reduction was announced as part of a plan to increase defence spending. In the 2025 spring statement the government also announced it would change the way ODA was allocated, ending FCDO’s role as the “spender and saver of last resort” and committing to a “process to look across all ODA programming to ensure it delivers on UK objectives and provides the best value for money and strategic coherence”. 

A 2025 information note by the Independent Commission for Aid Impact (ICAI) found that in 2027-28, as much as one-fifth of the ODA budget could be spent on supporting refugees and asylum seekers in the UK due to this reduction. 

Other past ICAI reports have found: 

• repeated in-year budget reductions and the lack of predictability in the development budget undermined the UK’s reputation as a reliable partner. 

• cross-government oversight and cooperation arrangements to manage soaring in-donor refugee costs (ODA spent supporting refugees and asylum seekers during their first year in the UK) were inadequate and not transparent. 

• increased risks from successive budget reductions to the UK’s commitment to the eradication of extreme poverty. 

The 0.7% target remains in legislation and the 2025 spending review confirmed that the government remains committed to returning to 0.7% “when the fiscal circumstances allow”.

2. Purpose and scope

This review will build on past ICAI work in this area, including the 2020 review, ‘Management of the 0.7% ODA spending target’, the 2025 information note, ‘Management of the official development assistance spending target’ and the 2023 review, ‘UK aid to refugees in the UK’. 

It will assess the effectiveness of the UK’s processes for allocating and managing the ODA budget from 2021-22 to 2024-25 and will draw forward-looking lessons to inform the UK’s approach to ODA management from 2026 onwards. It will also assess the impact of development spending to support refugees and asylum seekers in the UK on the government’s ability to ensure long-term value for money in ODA allocations. 

The review will not evaluate the longer-term impact of the reduction of the ODA spending target to 0.3% by 2027, but will describe the outcome and process of the 2025 spending review using available evidence. 

3. Review questions

This review will look at the following questions: 

1. How effective were the systems and processes for allocating and managing the official development assistance (ODA) budget across government departments from 2021-22 to 2024-25, and did these create a viable framework to ensure value for money? 
2. What has been the impact of the UK’s interpretation of the definition of official development assistance (ODA) from 2021-22 to 2024-25, in particular of in-donor refugee costs, and to what extent is this in line with international comparators? 
3. What lessons could the UK adopt from its previous approaches to allocating and managing official development assistance (ODA) in the period covered by the Spending Review 2025, to maximise long-term value for money and facilitate policy coherence on ODA across government? 

4. Governance and resourcing

Harold Freeman will be the lead commissioner for the review, providing guidance and oversight, with additional input from the Chief Commissioner, Jillian Popkins. 

The review will be undertaken by ICAI’s Service Provider and will be supported by ICAI’s Secretariat who will provide advice and support throughout the process. 

The review will be informed through interviews with UK government officials and engagement with expert stakeholders. 

The methodology and final report will be peer reviewed by Andrew Lawson, co-director of Fiscus Limited. 

5. Timetable and output

The review will progress to the following timetable: 

• July-September 2025: Research and fieldwork 

• November 2025: Emerging insights (update to government) 

• November 2025-February 2026: Report drafting and factual accuracy checks with government 

• March 2026: Publication of the review