UK aid: FCDO merger and the move to 0.5% four years on

Philip Loft

In 2020, the then Prime Minister Boris Johnson announced that the government would merge the Department of International Development (DFID) with the Foreign and Commonwealth Office. DFID had been established as a separate government department in 1997.

Soon after, the government also announced it would reduce aid spending from 0.7% to 0.5% of gross national income.

The spending reduction, the covid-19 pandemic, rising refugee costs and the impact of the Ukraine conflict, have made assessing the effect of the merger difficult.

This Insight outlines the general challenges to delivering UK aid since 2020, and the outlook for aid following the change of government in 2024.

What were the reasons for the 2020 merger and reduction of aid spending?

Mr Johnson argued that merging DFID with the Foreign and Commonwealth Office would “unite aid with our diplomacy”, bring “coherence to our international presence” and allow aid to project UK values, policies and interests overseas.

Later in 2020 the government also said it would temporarily reduce aid spending from 0.7% of gross national income (as it had been from 2013 to 2020) to 0.5% from 2021. It said this was “a matter of necessity” because of the economic and fiscal impact of the covid-19 pandemic.

How much did aid spending fall?

Total UK aid spending fell from a peak of £15.1 billion in 2019 to £11.4 billion in 2021, before rising to £12.8 billion in 2022.

Almost all countries in receipt of UK aid experienced large reductions from 2020 to 2023.

In 2023/24, the government also expected a “severe impact” of spending reductions on women and girls and those with disabilities (PDF) though announced some adjustments to mitigate this. .

What other challenges has UK aid faced since 2020?

There are three other significant challenges UK aid has faced since 2020:

The covid-19 pandemic

The UK had to rapidly alter its aid programmes to respond to the pandemic.

It spent £2.2 billion in aid addressing the pandemic from 2020 to 2022 (around 6% of the aid budget over this period) and also adapted many existing programmes.

As set out in the latest UN report on the sustainable development goals (SDGs), the pandemic, alongside climate change and the Ukraine conflict, put back global progress on the SDGs. In 2020, three years of progress on poverty reduction was reversed, with the global population living in extreme poverty (less than US$2.15/day) rising to 724 million.

Ukraine and rising food and energy prices

Russia’s invasion of Ukraine in 2022 pushed up global food and energy prices, aggravating humanitarian need and the impact of the pandemic.

The UN Food and Agriculture Organization reported 58% of countries experienced “moderately to abnormally high food prices” in 2022, four times higher than between 2015 and 2019.

An increasing amount of overseas aid was also directed to Ukraine.

Data reported to the Development Assistance Committee (DAC), part of the Organisation for Economic Co-operation and Development (OECD) which includes the world’s 30 major aid donors (except China), shows they gave US$18 billion in bilateral aid to Ukraine in 2022, 19 times higher than 2021. Aid decreased to all regions other than Europe in 2022.

A rise in spending on refugees within donor countries

A further impact of the Ukraine conflict has been an increase in refugees in Europe.

Money spent to meet the costs of hosting refugees for their first 12 months in an aid-donor country counts towards aid spending in DAC statistics.

Across the DAC, spending on refugees within donor countries rose to 15% of aid budgets in 2022, up from 7% in 2021.

In the UK, spending rose from £410 million in 2016 to £4.3 billion in 2023 (from 3% of the aid budget to 28%).

In 2022 the UK was one of 11 DAC members who partly or wholly funded this increase by reducing spending in other areas (though the Treasury also announced a £2.5 billion uplift in aid for 2022 to 2024).

The International Development Committee argued this was a “political choice” by the government. The government said to do otherwise would “undermin[e] the OECD DAC rules”.

How has the 2020 merger affected UK aid?

Both the National Audit Office (NAO) and Independent Commission for Aid Impact (ICAI) have assessed the impact of the merger on UK aid.

They note that the merger’s consequences are difficult to separate from the reductions in aid spending and other challenges since 2020 (described above) and it was too early to assess the merger’s impact on value for money.

In 2023, the ICAI said that the UK’s capacity to support international development had decreased, citing the loss of DFID expertise on managing complex emergencies and a decline in the transparency of aid spending.

In 2024, the NAO echoed this judgment, finding development capacity to have “reduced since the merger” and that there had been a loss of senior development roles overseas, undermining “credibility and [aid] accountability”.

Both concluded that the profile of the “D” part of the FCDO was stronger by 2023, with the Minister for Development (then Andrew Mitchell) attending cabinet, the launch of a new white paper focused on achieving the SDGs, and planned increases in aid spent directly in other countries from 2024.

Concern of former Minister for Development

Speaking in the Commons in July 2024 as Shadow Foreign Secretary, Mr Mitchell said that while in office he had tried to strengthen the development work of the FCDO, he had “not enough success”.

He argued “proactive leadership” would be needed to advance this goal, but warned:

If despite best efforts, that [goal] cannot be achieved under the merger—that will become clearer sooner rather than later during this Parliament—I will urge the Government to move swiftly and decisively to plan B.

While Labour opposed the merger in 2020, its 2024 manifesto contained no commitment to restore a separate department.

The direction of development under Labour

In opposition in 2024, then Shadow Minister for International Development Lisa Nandy (now Secretary of State for Culture, Media and Sport) said Labour would:

reduce aid spending on UK-based refugees
“rebuild” UK aid’s focus on “long-term economic cooperation” with partner countries and
refocus UK aid to lower-income countries and on “eliminating global poverty”

On taking office in July 2024, International Development Minister Anneliese Dodds, who is also serving as Minister for Women and Equalities in the Department for Education and is attending Cabinet, said the UK’s aid mission would be to “create a world free from poverty on a liveable planet”.

She said she will focus on four issues: economic transformation and unsustainable debt, climate finance, humanitarian aid, and empowering women and girls.

The government said it would lay out its approach to restoring spending to 0.7% “in due course”.