Management of the official development assistance spending target

This information note projects that in 2027-28, one-fifth of the official development assistance (ODA) budget will be spent on supporting refugees and asylum seekers in the UK, leaving as little as 0.24% gross national income (GNI) for overseas development. This would be the lowest percentage of national income in more than 50 years of aid statistics, matched only in 1999.

The report highlights that budget uncertainty in recent years has hindered effective forward planning by the Foreign, Commonwealth and Development Office (FCDO), damaging the UK’s reputation as a reliable partner.

Changes announced in the 2025 Spending Review mean FCDO’s ODA budget will be protected from volatility caused by fluctuations in the UK’s GNI and asylum-related costs – an issue previously raised by ICAI. However, FCDO will not automatically receive funds back to spend on development if other departments’ ODA spend is unexpectedly low or if the economy grows unexpectedly quickly.

The information note also highlights that cross-government processes have in the past often focused too narrowly on meeting spending targets, with limited ambition shown towards ensuring strategic coherence or monitoring the achievement of development objectives.

It suggests that substantial improvements to the coordination of aid spending between different government departments will likely be needed, to increase the strategic coherence of the UK’s offering and support the government to deliver its commitment to ‘modernise’ development cooperation.

Issues for further scrutiny

The information note suggests a number of important issues that will merit continuing scrutiny in the coming period, as the government implements its planned reduction of the aid budget to the equivalent of 0.3% of GNI.

1. How does the allocation of aid budgets across departments reflect the quality of their proposed spending and their capacity to engage in effective development cooperation?
2. Given the government’s stated intention to ‘modernise’ development cooperation, what processes will be established to improve cross-government coherence and coordination of a reduced aid budget?
3. How will the government’s approach to the allocation of aid budgets take account of its statutory requirements on reducing poverty and gender inequality?
4. In implementing the reduction to a 0.3% of GNI aid budget, will the government provide aid-spending departments with predictable, multiannual allocations so that they can make more strategic use of the reduced resources?
5. What measures is the government taking to bring down in-donor refugee costs (IDRC) (asylum-related ODA costs) over the life of the Spending Review? Given a reduced aid budget, will the government adopt a more conservative method for calculating IDRC, as recommended by the Organisation for Economic Cooperation and Development?
6. How will the government manage unexpected departmental under- and over-spends during the Spending Review period?
7. When fiscal conditions permit a return to the statutory 0.7% target, how will the government manage the large uplift in aid expenditure that will be required? Will it introduce a more flexible interpretation of the 0.7% target?
8. In the current Spending Review period, will ringfencing of funds for capital investments or financial transactions constrain spending choices or compromise value for money?

ICAI will consider these and other issues for its ongoing full review of the UK’s cross-government management of the aid target.