Aid spending in the UK

Aid spending in the UK

Background

1. The International Development Committee inquiry on Aid spending in the UK scrutinised the Government’s decision to spend a significant and increasing proportion of the Official Development Assistance (ODA) budget in the UK.¹ The proportion of aid spent in the UK drastically increased in recent years, while programmes supporting people in the world’s poorest countries were cut. The Government is legally and morally obliged to support people fleeing conflict and humanitarian crises who arrive in this country. It is, however, a political choice by Government to provide such support at the expense of vulnerable and marginalised people living in the world’s poorest countries. This inquiry examined the costs and consequences of that choice.

Aid spending on refugees in the UK

2. In 2021, the most recent year for which data are available, the Government spent more than £1 billion of the aid budget on in-country refugee costs.² That unprecedented expenditure accounted for almost 10% of the total ODA budget, which exceeded the percentage of ODA allocated to any other sector.³ In 2021, ODA spending was reduced on the health, humanitarian and education sectors, while in-country refugee costs was the only category on which expenditure increased.⁴ In 2020, the Government spent 4.3% of the ODA budget on in-country refugee costs compared with 2% in 2015.⁵ In 2021, Home Office spending from the aid budget on refugees in the UK increased to almost £1 billion, of which more than half was spent on “initial accommodation”.^{6 7}

3. The Government is yet to publish statistics on aid spending in 2022.⁸ However, the sum spent in the UK is likely to have expanded significantly, in part due to the increased number of people arriving in the UK under the Government’s resettlement schemes for Ukrainian and Afghan refugees and in small boats.⁹ The Center for Global Development (CGD) estimated that the amount of aid spent on in-country refugee costs in 2022 could exceed £3 billion, an increase of more than 300% since 2020.¹⁰ Save the Children estimated that those costs could be as high as £4.5 billion in 2022–23, accounting for one-third of the entire aid budget.¹¹ The publication of the Foreign, Commonwealth and Development Office’s (FCDO’s) Supplementary Estimate for 2022–23 suggested that those budgetary pressures will continue into the future.¹² Meanwhile, the Home Office’s Supplementary Estimate included plans to spend more than £2.6 billion of ODA in 2022–23, an increase of nearly £2 billion—or 300%—on its Main Estimate.¹³ The recent increase in the proportion and sum of ODA disbursed on supporting refugees in the UK is unprecedented and unsustainable.

Home Office ODA spending

4. We asked Treasury, FCDO and Home Office Ministers whether the sum that the Home Office can draw from the ODA budget is subject to any restrictions. Ministers were unwilling to answer that question, perhaps because no limit has been applied.¹⁴ Professor Stefan Dercon, former Chief Economist at the Department for International Development before it was merged into the FCDO, described the ODA budget as an “open-ended envelope” for Departments seeking funding for in-country refugee costs.¹⁵ He observed that allowing Departments to draw unlimited amounts of funding from the ODA budget does not incentivise them to spend that money effectively because, in any event, “ODA will pay for it”.¹⁶

5. In the most recent three years for which data are available, UK aid spending per refugee in the UK almost tripled, increasing from £6,700 per capita in 2019 to £21,700 per capita in 2021.¹⁷ That level of per capita spending exceeded any other OECD Development Assistance Committee (DAC) country during 2018–21. It is around three times the DAC average of £7,400.¹⁸ The increase in per capita costs is likely to have been caused by the cost of housing asylum seekers in hotels.¹⁹ Between March 2020 and September 2022, the number of asylum seekers housed in “contingency accommodation”, which largely consists of hotels, increased from almost 2,600 to more than 37,000.²⁰ The recent trebling of per capita costs on supporting refugees in the UK represents unwarranted largesse by the Home Office at the expense of both UK taxpayers and people living in the world’s poorest countries.

HM Treasury additional resources

6. In the Autumn Statement 2022, the Government announced “additional resources of £1 billion in 2022–23 and £1.5 billion in 2023–24 to help meet the significant and unanticipated costs which have been incurred” as a result of the increased number of refugees from Afghanistan and Ukraine, a total of £2.5 billion over two years.²¹ However, in-country refugee costs for 2022 alone may well exceed £2.5 billion. Based on the Prime Minister’s statement that the Government is spending “£7 million a day” on hotels, we put it to Ministers that costs could exceed £2.4 billion in just one year. In response, Robert Jenrick MP, Minister for Immigration, Home Office, acknowledged that Home Office spending on initial accommodation will be “substantially higher” than in 2021.²² The Home Office’s own Supplementary Estimate suggested that its ODA spending for 2022–23 could exceed £2.6 billion.²³ The additional ODA funding provided by HM Treasury for the next two years is inadequate, because it is less than the likely cost of supporting refugees in the UK for the next 12 months.

OECD rules

7. The OECD’s Development Assistance Committee (DAC), of which the UK is a member, determines the rules on using ODA to support refugees in donor countries.²⁴ Under those rules, donor countries can count the costs of assisting asylum seekers or refugees in their own countries for the 12 months following the date of their arrival as ODA.²⁵ Subsequent clarifications to the rules, however, urge donors to take a “conservative approach” to counting in-country spend on refugees as ODA.²⁶ The Government justified its decision to spend a significant proportion of the aid budget in the UK because such spending is permitted under the DAC rules.²⁷ However, the use of the aid budget for that purpose does not fall within the OECD’s definition of ODA, which is spending that “promotes and specifically targets the economic development and welfare of developing countries”.²⁸

8. Other DAC member countries have adopted different approaches. For example, Australia does not count any of its in-country refugee costs as ODA, while Sweden has set an upper limit on ODA expenditure on in-country refugee costs.²⁹ The UK is the only G7 state to count all its in-country spending on support for Ukrainian refugees as ODA.³⁰ The ONE Campaign described the UK Government as an “outlier”, while Bond observed that it is taking “full advantage” of the rules.^{31 32} Government policy on ODA spending on in-country refugees is incompatible with the spirit of the OECD Development Assistance Committee rules.

Oversight and transparency

9. The detail on ODA spending in the UK is published in the Government’s annual Statistics on International Development.³³ The most recent statistics cover 2021. Those statistics do not reflect recent important developments such as Russia’s invasion of Ukraine, which has increased the number of refugees arriving in the UK. The lack of up-to-date, accessible, granular data has constrained the Committee’s ability to scrutinise aid spending.

10. The Government frustrated our attempts to elicit additional information on how it spends ODA in the UK. For example, the IDC Chair, Sarah Champion MP, tabled Written Parliamentary Questions to the Home Office asking whether its spending on contracts with accommodation providers and other support services were drawn from the ODA budget. The Answers were entirely and wilfully unilluminating.³⁴ Publish What You Fund, an organisation that campaigns for greater transparency on aid spending, suggested that in-country refugee costs are “less transparent” than other forms of aid spending, because Departments other than the FCDO have poorer records on transparency.³⁵ Save the Children highlighted that while FCDO and HM Treasury monitor ODA spending by other Departments, “the current structure provides no oversight over the quality of spending surrounding its efficient and effective use”.³⁶ The Home Office approach to transparency on ODA spending is woefully inadequate and wilfully opaque. Parliament cannot adequately hold the Government to account when the Government is obscuring the facts.

Proposed ODA Board

11. Andrew Mitchell MP, Minister of State (Development and Africa), FCDO, described the ODA budget as “effectively out of control”.³⁷ He stated that the Government is seeking to “bear down” on ODA spending and maximise value for money through the establishment of a new ODA Board.³⁸ On 7 February 2023, he set out limited details on how the Board, which he plans to co-chair with the Chief Secretary to the Treasury, will operate.³⁹ He asserted that the ODA Board will “drive up the quality and coherence of ODA spent across government”.⁴⁰ We welcome his aspiration to improve accountability and transparency on ODA expenditure across Government and by the Home Office in particular. However, the proposed ODA Board is yet to meet and was announced in a letter to the Committee delivered late on the day before our oral evidence session with Ministers. The proposed new ODA Board is unproven and aspirational. The Government is yet to set out the detail on the ODA Board’s composition and function to Parliament, and the ODA Board is yet to conduct its first meeting. It is unclear how the new Board will prevent the Home Office from continuing to treat the ODA budget like a blank cheque.

Effect on UK aid provision overseas of UK aid spending in-country

12. In the past three years, the Government has cut UK aid by, for example, decreasing the aid budget from 0.7% to 0.5% of Gross National Income in 2020 and imposing a subsequent pause on “non-essential” aid spending. It argued that that pause was necessary to allow “time and fiscal space to revise departmental ODA budgets to accommodate the unexpected in-country refugee costs”.⁴¹ The reduced overall budget and increased expenditure from that budget on in-country refugee costs meant that the UK provided substantially less aid to the world’s poorest countries. In 2021, UK bilateral aid spending in least developed countries (LDCs) decreased to £1.4 billion, which represented around 12% of the aid budget. That 50% decrease in aid to LDCs amounted to a more than £900 million cut in UK aid spending.⁴² That cut was made against a backdrop of severe humanitarian need in, for example, the Horn of Africa and Afghanistan.

13. NGOs emphasised the need to spend ODA where it is most effective. Bond, the network for UK-based international development organisations, recommended that the Government should “re-centre” poverty eradication, the Sustainable Development Goals and the commitment to leaving no one behind as the main priorities for UK aid.⁴³ Daphne Jayasinghe, Chief Policy Adviser, International Rescue Committee (IRC), told us that the aid budget should be spent “where it does the maximum amount of good”, especially in fragile and conflict-affected states.⁴⁴ We asked Andrew Mitchell MP, Minister of State (Development and Africa), FCDO, how increased aid spending in the UK had affected his Department’s ability to help people in the world’s poorest countries. He acknowledged that the ODA budget has been “very constrained” and that it was “extraordinarily difficult” to plan long-term spending.⁴⁵ The increase in ODA expenditure in the UK has decreased funding for aid projects supporting poor and marginalised people in the world’s least developed countries, a self-defeating outcome which is likely only to increase the number of refugees arriving in the UK.

Recommendation

14. The Chief Secretary to the Treasury argued that “it is all taxpayers’ money that needs to be managed”; we agree.⁴⁶ The eye-watering cost of supporting refugees in the UK may be politically unpalatable and publicly unpopular, but the Government should not attempt to conceal it by performing a budgetary sleight of hand at the expense of people living in the world’s poorest countries. To guarantee that the FCDO can plan and deliver support for people living in the world’s poorest countries, to ensure that any future Home Office raids on the ODA budget are supplementary to FCDO expenditure on development and to comply with the spirit of the OECD Development Assistance Committee rules, HM Treasury must ring-fence the equivalent of 0.5% GNI in the ODA budget for expenditure on development assistance delivered outside the UK from 1 April 2023.

Formal minutes

Tuesday 28 February 2023

Members present:

Sarah Champion, in the Chair

Richard Bacon

Theo Clarke

Mrs Pauline Latham

Chris Law

Mr Ian Liddell-Grainger

Kate Osamor

Mr Virendra Sharma

Draft Report (Aid spending in the UK), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 14 read and agreed to.

Resolved, That the Report be the Sixth Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available in accordance with the provisions of Standing Order No. 134.

[Adjourned till Tuesday 7 March at 2.00 pm.

Witnesses

The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.

Tuesday 13 December 2022

Enver Solomon, Chief Executive, Refugee Council; Daphne Jayasinghe, Chief Policy Adviser, International Rescue CommitteeQ1–34

Ian Mitchell, Senior Policy Fellow, Center for Global Development; Professor Michael Collyer, Professor, University of Sussex; Professor Stefan Dercon, Professor of Economic Policy, Blavatnik School of GovernmentQ35–54

Wednesday 8 February 2023

Rt Hon Andrew Mitchell MP, Minister of State (Development and Africa), Foreign, Commonwealth & Development Office; Rt Hon Robert Jenrick MP, Minister for Immigration, Home Office; Rt Hon John Glen MP, Chief Secretary to the Treasury, HM TreasuryQ55–175

Published written evidence

The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.

ASU numbers are generated by the evidence processing system and so may not be complete.

1 Amnesty International UK (ASU0001)

2 Bond (ASU0008)

3 Center for Global Development (ASU0010)

4 Development Initiatives (ASU0012)

5 Foreign, Commonwealth & Development Office (ASU0016)

6 Foreign, Commonwealth and Development Office, His Majesty’s Treasury, The Home Office and The Department for Levelling Up, Housing and Communities (ASU0015)

7 International Rescue Committee (ASU0014)

8 International Rescue Committee UK (ASU0013)

9 Kernohan, Professor George (Professor of Health Research, Ulster University) (ASU0002)

10 Lazell, Dr Melita (Assocaite Head of School: Principal Lecturer in Political Economy, University of Portsmouth) (ASU0005)

11 Publish What You Fund (ASU0004)

12 Save the Children (ASU0009)

13 Scotland’s International Development Alliance (ASU0003)

14 The HALO Trust (ASU0011)

15 The ONE Campaign (ASU0006)

List of Reports from the Committee during the current Parliament

All publications from the Committee are available on the publications page of the Committee’s website.

Session 2022–23

Session 2021–22

Session 2019–21

Footnotes

1 The IDC Aid Spending in the UK inquiry opened on 15 November 2022 with a call for evidence. The Committee published 15 items of written evidence, including a joint submission from the FCDO, the Treasury, the Department for Levelling Up, Housing and Communities and the Home Office. The inquiry included two oral evidence sessions. On 13 December 2022, the Committee took oral evidence from NGOs and academics. On 8 February 2023, the Committee took oral evidence from Rt Hon. Andrew Mitchell MP, Minister of State (Development and Africa), Foreign Commonwealth and Development Office, Rt Hon. John Glen MP, Chief Secretary to the Treasury and Rt Hon. Robert Jenrick MP, Minister for Immigration, Home Office. In addition, the Committee visited South Yorkshire in December 2022 to examine Home Office expenditure on refugees.

2 Under the OECD DAC rules on aid spending, domestic aid spending on refugees is categorised as “in-donor refugee costs”. These figures are for calendar year 2021. We use the phrase “in-country refugee costs” rather than “in-donor refugee costs” throughout this report to support the general reader.

3 Foreign, Commonwealth and Development Office; His Majesty’s Treasury; Home Office; and Department for Levelling Up, Housing and Communities (ASU0015)

4 Foreign, Commonwealth and Development Office, Statistics on International Development: Final UK Aid Spend 2021, November 2022

5 Foreign, Commonwealth and Development Office; His Majesty’s Treasury; Home Office; and Department for Levelling Up, Housing and Communities (ASU0015)

6 Ibid. According to the Home Office, there are two main stages of asylum accommodation. These are initial accommodation: short-term accommodation for asylum seekers who need accommodation urgently, and dispersal accommodation: longer-term temporary accommodation managed by accommodation providers on behalf of the Home Office. Source

7 We note that 20% of expenditure on refugee accommodation in hotels in the UK is returned to HM Treasury in VAT.

8 A full breakdown of aid spending in 2022 will be published in the next edition of Statistics on International Development in November 2023. Less detailed provisional statistics are due for publication in April 2023.

9 Center for Global Development, Projections of UK-Hosted Refugees, and the implications for the UK’s Aid Budget and Spend, 26 September 2022

10 Center for Global Development (ASU0010)

11 Save the Children (ASU0009)

12 FCDO, Supplementary Estimate 2022–23. The Supplementary Estimate included plans to reduce the FCDO’s ODA expenditure by more than £1.7 billion compared with the original spending plans (Main Estimates), published in May 2022. The FCDO’s Supplementary Estimate Memorandum stated that the purpose of this was to “support the reallocation of ODA budget across government”. It is not currently clear how that £1.7 billion will be allocated among other Departments, but it suggests a possible reprioritisation of aid spending to Departments that are more likely to spend their ODA allocations within the UK.

13 Home Office, Supplementary Estimate 2022–23

14 Q69–70

15 Q48 (Professor Dercon)

16 Q48 (Professor Dercon)

17 Center for Global Development (ASU0010)

18 Center for Global Development, Projections of UK-Hosted Refugees, and the implications for the UK’s Aid Budget and Spend, 26 September 2022

19 Development Initiatives (ASU0012)

20 The Guardian, Number of asylum seekers placed in UK hotels has soared since 2020, 10 February 2023

21 HM Treasury, Autumn Statement 2022, November 2022

22 Q106. Home Office spend on initial accommodation in 2021 was £582 million.

23 Home Office, Supplementary Estimate 2022–23

24 The other members of the DAC are listed here.

25 The DAC rules set out the legitimate costs that can be counted as ODA: these costs include accommodation, subsistence, health and education. The DAC rules clarification also set out the categories considered to be under the term “refugee”. These include: asylum seekers; refugees and recognised refugees; and people granted temporary protection, such as through a temporary resident permit, after applying for asylum to avoid civil war or severe unrest.

26 OECD, Clarifications to the statistical reporting directives on in-donor refugee costs, p.15

27 OECD, United Kingdom: In-donor refugee costs in ODA, accessed February 2023

28 OECD, Official development assistance (ODA), accessed February 2023. See Amnesty International UK (ASU0001) and Development Initiatives (ASU0012)

29 The ONE Campaign (ASU0006)

30 Center for Global Development, Projections of UK-Hosted Refugees, and the implications for the UK’s Aid Budget and Spend, 26 September 2022

31 The ONE Campaign (ASU0006)

32 Bond (ASU0008)

33 SID is published each November and contains data on aid spending for the previous calendar year.

34 PQ 111599 and PQ 117597

35 Publish What You Fund (ASU0004)

36 Save the Children (ASU0009)

37 Q426 (Andrew Mitchell), Oral evidence taken on 6 December 2022

38 Q61 (Mr Mitchell)

39 Foreign, Commonwealth and Development Office (ASU0016)

40 Ibid.

41 Foreign, Commonwealth and Development Office; His Majesty’s Treasury; Home Office; and Department for Levelling Up, Housing and Communities (ASU0015)

42 Bond (ASU0008)

43 Bond (ASU0008)

44 Q34 (Daphne Jayasinghe)

45 Q62 (Mr Mitchell)

46 Q158 (John Glen)