How can the UK mitigate the impact of aid cuts?
The Government has made the easiest decision politically to find money for its defence spending increase. The increase to 2.5% of GDP is very welcome, but the decision to take the money from our Official Development Assistance (ODA) budget is strategically short-sighted. It will mean we have to spend a lot more in the future. In a recent report, the Coalition for Global Prosperity outlined that a well-designed and well-funded development budget can counteract the rising influence and impact of the new axis of autocracies — Russia, China and Iran.
Despite the blatant disregard for global rules through its invasion of Ukraine, Russia has managed to avoid international isolation due to its reactive foreign policy that exploits domestic instability across Africa. By stabilising under-pressure regimes, it has increased its support across the developing world. The number of developing nations leaning towards Russia has increased, while support for the West has declined. Moscow has a greater degree of influence over the domestic and foreign policy of many nations and is using exclusive mining rights across Africa to fund its war in Ukraine. For the UK to step back further from Africa, leaving more nations on the edge of fragility is to open more doors for the Kremlin, and they will not hesitate to exploit it.
Meanwhile, in the Middle East, Iran suffered a catastrophic twelve months. Its proxies, Hamas and Hezbollah, have been decimated by Israeli military activity, and its supply route to fund its terrorist groups was removed when the Assad regime fell. However, the conditions that lead young people in Lebanon, Gaza, Yemen, Syria and Iraq to join Iranian-backed groups like Hezbollah remain. Poverty and a lack of employment opportunities create a breeding ground for proxy recruitment. Without addressing the root causes that drive individuals to join these proxy groups and the conditions that allow them to exert regional influence, they will see a resurgence. Likewise, harming our ability to support Syria on its transition to a stable, more equitable governance structure will cause rival groups to compete for power, with Iran and Russia jumping in to support select groups, both economically and militarily, for their own gain.
By cutting our aid budget, we are effectively ensuring that China’s influence and impact will grow, causing colossal long-term consequences: Beijing will be able to foster global norms in its image, with human rights being undermined; we put our access to critical minerals and international trade at risk; and China will weaponise its infrastructure investment for a more globally operational military. The decision to fund our defence increase from our development budget is strategically short-sighted and will only embolden our adversaries.
The question is now: how can the UK mitigate the detrimental impact of aid cuts and use our depleted development budget to maximum effect over the coming years? When we spent 0.7% of GNI on aid, the UK could do a lot more across a variety of areas. Now, as we move to 0.3%, our choices are constrained and attempting to have a significant role across many areas will lessen the impact that we can have in each. It is better to be a master of one than a jack of all trades. We will have to specialise in fewer areas which have larger trickle-down effects. Two stand out: governance and institution-building, and global health.
The world is more unstable today than it has been for decades, and more are living in fragile and conflict-affected states than at any time in the post-war era. Indeed, just shy of 2 billion people live in fragile contexts, accounting for a quarter of the world’s population and three-quarters of the world’s extreme poor. Fragility and conflict are often driven by a lack of inclusive and stable institutions. When states are weak and cannot fulfil their purpose, or exclude segments of the population from political or economic power, the stakes in politics are increased and individuals and groups revert to a Hobbesian state of nature whereby they compete for survival, power and wealth. Conflict spreads across borders, leading to greater instability, humanitarian crises and migration.
When the aid budget declines to 0.3% — less than £10 billion — the private sector will be needed more than ever. However, the risks of investing and doing business across the developing world have only heightened over the past few years, disincentivising private sector engagement. Simply, without stronger and more democratic institutions that encourage political participation and greater economic rights, the City of London and other global financial hubs will not see investing in the developing world as intelligent.
The UK has some of the most well-built political, economic and judicial institutions in the world, and the role that these can play in technical assistance, alongside a higher proportion of our ODA budget going in this area, will do a lot to de-risk private sector investment. The World Bank shows that a one-point score increase in public institutional adequacy translates to a 23% increase in FDI projects.
The second area is global health, another area where Britain has historically had an outsized global impact. We have spearheaded global initiatives like Gavi — being its largest sovereign donor — and have helped the initiative to vaccinate over a billion children in 78 countries, preventing more than 18 million child deaths.
A strong role in global health is one of the most cost-effective investments the UK can make in development. Before the Covid-19 pandemic, the Decade of Vaccine Economics Group noted that $1 spent on averting ill health returned $54. It also helps us at home. Diseases do not respect borders, and the spread of diseases due to a lack of vaccinations can easily come to our shores.
Specialising in these two areas will maximise the UK’s development impact at a time when our budget has been unwisely raided. They will help to mitigate the fragility that cuts to our aid budget will cause and will mean that the cuts are not as detrimental as they could be for our security — especially when it comes to tackling Russian, Chinese and Iranian influence. Likewise, our work on global health yields tangible humanitarian benefits and further specialisation in this will stem the deterioration of the UK’s image on the global stage. There is no sugarcoating the humanitarian and strategic impact that our aid cuts will have, but they can be mitigated with the right approach to our depleted budget.