UK to ‘remain major aid donor’ amid calls for budget overhaul

THE UK would remain one of the world’s top aid donors even if the 0.7 per cent target was dropped, government insiders have suggested.

With the Treasury reportedly pushing for changes to the way foreign aid is spent, Dominic Raab, the Foreign Secretary, has insisted that the UK remains committed to the spending. Last night, Boris Johnson was urged to resist cutting the aid budget by a cross-party group of MPS, who warned it would be a “devastatingly backwards step”.

Whitehall sources said that prior to the target being enshrined in law in 2015, aid spending was 0.57 per cent of national income, meaning it would remain among the top 10 donor countries.

Rishi Sunak, the Chancellor, faces an epochal choice: should he address the disastrous consequences of lockdown for the public finances via tax rises, spending cuts or both? The cost of the pandemic is huge; debt has already surpassed 100 per cent of GDP. Prior to the crisis, Britain had been through a decade of fiscal restraint and the Government, in a bid to retain its new voters in the Red Wall, had promised a new round of spending. Rather than backing out of some of those pledges, some policy wonks would prefer the country either to continue to live beyond its means or to raise taxes.

Increasing taxation is the very last thing the Government should do if the goal is to restore economic growth. Whose shoulders would the tax raids fall on in any case? The middle classes are overburdened as it is. If businesses, pension savers or investors are hit, that would destroy jobs and drive investment overseas, triggering a vicious circle of declining growth and incomes, akin to the Seventies. Tory backbenchers are making it known that their voters will not tolerate it. Moreover, the historical record shows that when the Conservatives raise taxes, they lose elections and the level of tax as a proportion of the economy is already not far off the post-war high.

So common sense dictates that savings should be the priority. Currently, however, many areas of government spending are treated as untouchable, to be protected regardless of the state of the wider public finances. The foreign aid budget is a case in point. When David Cameron was prime minister, it was written into law that the UK must spend at least 0.7 per cent of its GDP on international development. It is remarkable that, even in these straitened times, many ministers will not countenance any change in that policy.

Why? Aid has humanitarian value, of course, and the country should continue to give generously. But why should a fixed percentage of the UK’S annual income go abroad, regardless of the circumstances at home? In good years, this has meant the aid budget has been bloated and civil servants have been under pressure to disperse it, a dynamic that probably explains some of the stranger projects our money has been spent on. In fallow years, the sum falls, it is true, but that only invites the question: why do we not donate the figure that is actually needed rather than an arbitrary sum that, in any given year, might be too much or too little?

Defenders of the 0.7 per cent target say that it is a symbol of Britain’s commitment to the world. But Britain keeps that commitment in a variety of other ways. Our Armed Forces have helped to keep it free; our trade helps make it rich.

We are currently funding research at British universities that may result in a Covid vaccine, which may well end up being distributed globally free of charge. And Britain could scrap its aid target, switch to the 0.57 per cent of GDP it spent before it was introduced, and still be one of the 10 biggest donors in the world. The UK has spent hundreds of millions on fighting the coronavirus overseas.

We are now in a new era, facing circumstances that just a few months ago nobody could have foreseen. As Mr Sunak grapples with the consequences, there can be no sacred cows that limit the country’s options.

Ultimately, however, everything depends on returning the economy itself to full health, and that will not happen until there is a clear, united front from the Government around strategy. Are we supposed to be trying to get back to the workplace with the intention of staying there? Or are we on tenterhooks for a second wave of the virus, ready to rush back home at the first sign of risk?

Without a sense of certainty, the country will continue to drag its heels. Without a robust economic revival, the choices faced by Mr Sunak will be even harder because there will be even less money to play with.

If businesses, pension savers or investors are hit, that would destroy jobs and drive investment overseas

We are now in a new era, facing circumstances that just a few months ago nobody could have foreseen