(The image above comes from the International Development Committee)

Michael Murray

Introduction

The UN requires that countriesallocate 0.7% of their Gross National Income (GNI) on Official Development Assistance (ODA) for the purposes of the economic development and welfareof developing countries. 

TheInternational Development (Official Development Assistance Target) Act 2015 lays down how the UK will meet this requirement and further stipulates a government duty to lay a statement before Parliament if the 0.7% target is not met.

On 13 July 2021,the Boris Johnson-led Government put a motion to the House of Commons asking it to reduce ODA aid to 0.5% .

The previous day, Rishi Sunak, his Chancellor of the Exchequer, gave the reasons why the Commons should vote in favour of it. 

“The damage inflicted on our economy and the public finances by coronavirus has been immense. We have suffered the biggest recession in 300 years. Last year we borrowed nearly £300 billion—equivalent to 14.3% of GDP—the highest since world war two. Debt as a percentage of GDP reached nearly 100%, the highest since 1962. This year we are forecast to borrow the second highest amount on record during peacetime—second only to last year. This is clearly unsustainable, and the economic damage of coronavirus cannot be fixed overnight.

“That is why we have had to take difficult decisions to get borrowing down and restore the public finances—including by increasing corporation tax, freezing income tax personal thresholds and maintaining public sector pay at current levels.

“As part of these difficult decisions, we took the decision last year to temporarily reduce the ODA budget to spend 0.5% of gross national income on overseas aid in 2021.

“A motion will be tabled by the Government alongside this written ministerial statement asking the House of Commons to consider this approach, for debate tomorrow. If the House approves the motion, recognising the need to manage the public finances responsibly and maintaining strong investment in domestic public services like the NHS, schools and police, then the Government will continue with the approach set out in this statement. 

“However, if the House were to negative the motion, rejecting the Government’s assessment of the fiscal circumstances, then the Government would consequently return to spending 0.7% of GNI on international aid in the next calendar year, and with likely consequences for the fiscal situation, including for taxation and current public spending plans.”  He continues: “Consistent with the fiscal principles set out at March Budget 2021, and with the principles contained within the Conservative Party 2019 Manifesto, the Government commit to spending 0.7% of GNI on ODA when the independent Office for Budget Responsibility’s fiscal forecast[1] confirms that, on a sustainable basis, we are not borrowing for day-to-day spending[2] and underlying debt[3]is falling.”   

(Above, extracts from Hansard, UK Parliament:  International Aid: Treasury Update, Vol 699: debated on Tuesday 12 July 2021, emphasis in bold added. Ed)

This is going to hurt me more than it hurts you

The following day the Prime Minister, Boris Johnson opened the debate in an unusually collegial and serious tone.

BJ: “I believe that, on this vital subject, there is common ground between the Government and hon. Members on both sides of the House, in the sense that we believe in the power of aid to transform millions of lives. That is why we continue to agree that the UK should dedicate 0.7% of our gross national income to official development assistance……

“This is not an argument about principle. The only question is when we return to 0.7%. My purpose today is to describe how we propose to achieve this shared goal in an affordable way.”

“This pandemic has cast our country into its deepest recession on record, paralysing our national life, threatening the survival of entire sectors of the economy and causing my right hon. Friend the Chancellor to find over £407 billion to safeguard jobs and livelihoods and to support businesses and public services across the United Kingdom. He has managed that task with consummate skill and ingenuity, but everyone will accept that, when we are suddenly compelled to spend £407 billion on sheltering our people from an economic hurricane never experienced in living memory, there must inevitably be consequences for other areas of public spending…..”  

Johnson ended his speech by reminding the House that: “ ..the  International Development (Official Development Assistance Target) Act 2015 expressly provides that fiscal circumstances can allow departure from the 0.7% target.” 

How was Labour going to respond to Sunak and Johnson’s coherently put argument for a delay in renewing the 0.7% ODA commitment ? An argument, moreover, underpinned with the commitment to return to the 0.7% of GNI when the OBR could confirm  (1) that we are no longer borrowing for day-to-day spending and (2) the underlying debt is falling.  

Labour’s response to proposed cuts

TheLabour leader’s response was unequivocal. 

Keir Starmer, “Let me be clear: Labour will vote to reject this motion tonight and to return overseas aid to 0.7% of GNI…..” 

He pointed out the double whammy involved in the Government’s proposed reduction. 

“…..We all recognise that a contracting economy means a relative contraction in our aid budget, but the Chancellor and Prime Minister are asking the House to agree to go beyond that, to impose a new target of 0.5% and to create entirely new criteria for ever returning to 0.7%. In effect, the Chancellor is proposing a double lock against reverting to 0.7%. The written ministerial statement makes it clear that Britain will go back to 0.7% only when public debt is falling as a percentage of GDP and there is a “current budget surplus.”

“….. The case that we make is this: first, that the cut is wrong, because investing 0.7% on international aid is in Britain’s national interest; secondly, because the economic criteria set out by the Chancellor would lead to an indefinite cut that is likely to last beyond this Parliament,..” 

“… thirdly, because it matters that this House keeps its word to the voters who elected us. Every Member here—every Member here—was elected on a manifesto to retain the 0.7% target, and it matters that we keep our promises to the world’s poorest, particularly at such a time of global uncertainty…….” 

BJ   “…. There is no question about our commitment to overseas aid. The only question is when we return to the 0.7% target. The motion puts beyond all doubt that we will do so once two clear objective tests have been met: our national debt is falling, and we are no longer borrowing for day-to-day spending.”  

Rachel Reeves Labour Shadow Chancellor:  “… The Government say that global Britain is at the heart of how we engage with the world, but this move to unilaterally cut overseas aid is a direct attack on what it means to be global Britain. It is a decision that will reduce our power, reduce our influence in the world and undermine our security here at home. At this moment perhaps more than any other, we should be looking to project our power and influence for good around the world, to create change in our national interest but in the global interest, too.

“…The Chancellor knows full well that our country’s commitments are as a proportion of our gross national income, and that is right; it means that as our economy grows our generosity as a country grows, but as our economy shrinks so does our generosity to those in the poorest parts of the world. That is right and it happens automatically, without the cuts being proposed on top….

“….But with a 30% reduction—that is what we are talking about today — In just one year, never has our aid budget been cut so savagely, so suddenly and by so much. If this cut goes through this evening and the House votes for it, it will diminish Britain. It will reduce our power and influence for good in the world, and it will undermine our security here at home too. This is not just about how much aid we give overseas. It is about the country that we are and the country that we want to be. I urge hon. and right hon. Members to reject the motion and do what they know is right.”

(Above, selective, extracts from a cross party debate reported in Hansard, UK Parliament:  International Aid: Treasury Update, Vol 699: debated on Wednesday 13 July 2021, emphasis in bold added. Ed)

In the event, when put to the vote, in an almost full House, the result was: 333 for the Government motion and 298 against. 

A leading anti-poverty campaigning organisation, one of many it can be said, blasted the result: 

“This is a dreadful day for people around the world living in poverty and facing injustice. Despite the best efforts of many MPs of all political parties who showed solidarity and compassion, today, the UK Government has set out firmly where it stands on this vital moral commitment by setting a test that is, for all practical purposes, impossible to meet. Make no mistake: this was a political decision, not an economic or technical one. 

“With half the world’s population still without access to essential health services, and with the COVID-19 pandemic still raging, the reduction of UK aid from 0.7% to 0.5% has meant that this year alone hundreds of thousands of additional preventable deaths are inevitable, and this will continue year on year unless and until we deliver on our promise. This is a massive decision – millions of lives literally hang in the balance, once you factor in how the knock-on effect of the UK effectively saying ‘0.7% is never affordable’ could affect other donors.”  Results.UK, 13 July, 2021

Fiscal responsibility spelled out

Yet, a little over a year later, David Lammy, Labour’s Shadow Foreign Secretary, was reported  in Devex,com as having doubts about Labour returning to a  0.7% aid budget, and quoted as saying: “We will get Britain back on track to meet its commitment to the U.N.’s 0.7% development target as soon as the fiscal situation allows.” (23 November, 2022)

Asked how Labour would judge when the fiscal situation would be acceptable, Lammy refused to answer, saying instead: “It would be fiscally irresponsible for me to tell you the terms under which we would return to 0.7%” (Devex, op. cit)

Incidentally, the Treasury watchdog has advised that economic tests set by the Conservatives for returning to spending 0.7% will not be met before 2028 at the earliest.  David Lammy would have known that.   

Déjà Vu –  or –  here we go again

“Keir Starmer has confirmed that a Labour government would keep the Conservatives’ controversial two-child benefits cap, despite unease among his top team and leading academics over the policy, which has been blamed for pushing families into poverty.

“Starmer said on Sunday that he was “not changing that policy”, when asked if he would scrap it if Labour wins the next election. His shadow work and pensions secretary, Jonathan Ashworth, had condemned it as “heinous” just last month.

“Labour had come under fresh pressure to promise to scrap the cap after it emerged that one in four children in some of England and Wales’s poorest parliamentary constituencies live in families left at least £3,000 a year out of pocket as a result.”  (Guardian 17 July, 2023)  

Regular readers of Labour Affairs, aware of today’s  Labour Party“live, horse and you’ll get grass” attitude to policy formulation, reading about the ODA aid issue will have been  reminded of  Labour’s U-turn on the 2-child benefit cap issue and the consternation it caused.

It was the subject of Michal Lerner’s  article in the September, 2023  issue of Labour Affairs  “How to pay for it. The case for the elimination of the cap on child benefit”

In the July, 2023 issue of Labour Affairs it had been arguedthat the fatal flaw in the Labour Party, including its left wing, was the assumption that there is no difference between the budget of a government and the budget of a household.  And this, inexorably, invites the killer question: how are the proposed policy initiatives going to be funded? 

At a time when the Labour Party conference, and its accompanying myriad fringe events are just around the corner it may be timely and appropriate to re-dedicate ourselves to understanding how a currency issuing government finances its spending and the idea, developed in the article, that “the size of the national debt is an irrelevant statistic and that it should never influence government policies.”  See the Labour Affairs September The Independence of the Bank of England – Editorial.

The July Labour Affairs article “Starmer’s Moment of Weakness Approaches” concludes with this observation: failure to understand the difference between household and government budgeting led to the collapse of Labour in the face of George Osborne’s austerity, and an exhortation:  Let’s make sure it does not happen again under Starmer.

Another fine mess ….

The U.K. will be prevented from diverting billions from its aid budget to pay the domestic costs of asylum-seekers as a result of the recently enacted Illegal Migrant Act, cracking down on new arrivals, the Organisation for Economic Co-operation and Development (OECD) has indicated.

According to civilserviceworld.com the Home Office spent £3.7bn of ODA in 2022 – more than a quarter of the £12.8bn budget for the year – mainly on hotel accommodation for refugees. (22 May, 2023)

“There’s now a scramble between three departments to avoid responsibility for paying for this if the costs can no longer be counted as ODA,” said one source familiar with the row.

“The Treasury has told the Home Office it can’t have more money, the Home Office is saying it doesn’t have the budget for it, so it will have to come from the Foreign and Commonwealth Office (FCDO ) But the FCDO is saying that if it isn’t ODA, it won’t pay,”  an inside source told Devex. (26 July, 2023) 

Sarah Campion, MP for Rotherham and Kate Osamor are the Labour members of the cross party International Development Committee, a Commons Select Committee.  Sarah is its Chair.  It can be followed on Twitter @commonsIDC 

When the committee called for the ring fencing of ODA aid for overseas spending it was met with the following response from the Treasury:  “not affordable in the current highly challenging economic and fiscal context”. 

For the two main UK political parties fiscal rectitude, it seems, is your only man.