UK civil servants were given five to seven working days to prepare 30% cuts in the overseas aid budget last summer, including a £730m cut to bilateral aid that it later emerged was unnecessary.
The cuts were agreed in July 2020 on the basis of a single forecast reduction in the size of the UK economy, which was shown to be too pessimistic five days after the cuts package was signed off.
Ministers spent only seven hours discussing the proposed £2.9bn cuts to multilateral and bilateral aid, and then imposed them predominantly on the world’s poorest countries despite giving instructions for the opposite to happen.
The damning findings come in a report by the government’s own independent commission for aid impact.
The speed with which £2.94bn (19%) of in-year aid cuts were imposed is likened in the report by a civil servant to executing “a handbrake turn on an oil tanker”.
The report finds “value-for-money risks were further exacerbated by the speed” of the cuts.
Civil servants, armed with a single forecast from the Office of Budget Responsibility on the future size of the economy, were ordered to “cut once, cut deep”, taking the aid budget down from £15.8bn to below £13.3bn.
The cuts, separate to the current round of cuts being imposed as a result of the decision to reduce the aid spending target from 0.7% to 0.5%, were implemented last summer as a result of the Covid-induced contraction in the size of the economy, and a policy decision to switch more aid spending to fighting Covid.
The cuts were agreed on 9 July 2020 and signed off by the prime minister on 20 July after four “star chamber meetings” chaired by the foreign secretary, Dominic Raab.
The cuts package was not reopened, even though on 14 July less pessimistic Office for Budget Responsibility forecasts for the size of the economy in 2020 were published, meaning that the government could have spent anywhere between £150m and £720m more in Overseas Development Assistance than was possible on the basis of the April “reasonable worst case” scenario set out by the OBR.
The cuts were also being implemented just as Boris Johnson announced a merger of the Department for International Development and the Foreign Office. The timing added to the policy uncertainty, the report finds, and the cuts did not follow the global trends.
Over £1.5bn of £2.5bn Foreign Office/DfID aid cuts were found last summer by deferring payments to multilateral bodies notably the World Bank International Development Association, the report finds. But a further £738m was cut from the UK bilateral aid programme.
Once it emerged closer to the end of 2020 that UK gross national income was set to be higher than expected in April, making the aid budget calculated as 0.7% of GNI larger, ministers quickly increased the aid budget by bringing forward a previously deferred £700m payment to the World Bank. Civil servants are quoted in the report as saying they regret “the overshooting of the bilateral aid budget cuts”.
Although civil servants drew up “a battle plan for 40 highly vulnerable countries” in an attempt to protect them, the report finds the cuts were six times larger in these vulnerable countries than elsewhere.
The seven countries that lost most aid in value terms were Pakistan, Syria, Uganda, South Sudan, Bangladesh, DRC and Yemen. Together these countries lost £440m in aid. No systematic review of the basis for these cuts occurred, the report says.
The report recommends the Foreign Office in future use more than one forecast to predict the size of the economy, as well as find a less rushed way to make cuts.
The Foreign Office said it set clear targets and “managed the aid budget based on available forecasts and in the face of deeply uncertain economic conditions”.
Laurie Lee, the chief executive of Care International UK, said: “The biggest worry from all this is that the Treasury is making the same mistake again in 2021. The ODA budget for 2021 is £1.15bn less than it would be if the Foreign Office used the Bank of England’s UK growth forecast +7.5% in 2021. The Foreign Office and Treasury by contrast have assumed -3.5% GNI in 2021.”