Rachel Reeves’ plan to cut nearly £2bn from the foreign aid budget has sparked a Cabinet response, The Telegraph has revealed.
Foreign Secretary David Lammy is among ministers demanding he announce more money for the aid budget and warning of the damage the cuts would cause.
But the Chancellor is prepared to allow aid spending to fall to 0.5 per cent of gross national income (GNI), after two years in which it was raised above that level by former Conservative Chancellor Jeremy Hunt.
Aid organisations, including the charity’s UK arm run by David Miliband, have warned that Ms Reeves’ plans would see the aid budget fall to a 17-year low and are lobbying ministers on the issue.
The row is just one in a series of disagreements over the Budget as Cabinet ministers rail against the spending efficiency demanded by the Treasury ahead of October 30.
The health and education ministries have been ordered to save at least £1bn each, despite foreign secretaries promising there will be no return to austerity.
Cabinet ministers are taking their complaints directly to Chief Secretary to the Treasury Darren Jones in face-to-face meetings this week.
‘Iron grip’ on spending
Multiple government insiders told The Telegraph that ministerial tensions over Ms Reeves’ demands for spending cuts were far greater than the so-called No 10 dispute that has made headlines.
“He has a tight grip on spending,” a Whitehall source said.
The negotiations form the backdrop to what Sir Keir Starmer and Ms Reeves warned the public would be a “painful” Budget, with tough decisions on spending, taxation and welfare.
The Treasury is expected to launch a tax raid to raise extra revenue, but Ms Reeves is also calling for savings in departmental budgets.
He told ministers he wanted £3bn of efficiencies to be achieved even as he sought to boost overall public spending to avoid real-term cuts for government departments.
The clash over foreign aid comes after Rishi Sunak abandoned Lord Cameron’s pledge to spend 0.7 per cent of GNP on overseas development aid during Covid and instead spend 0.5 per cent.
Labor remained in the same position, promising a return to 0.7 per cent once public finances stabilized. No date has been set for the fulfillment of this promise.
But in the final years of the Tory government, Andrew Mitchell and Jeremy Hunt, foreign secretary and chancellor respectively and both supporters of overseas aid, increased the aid budget.
They agreed an extra £2.5 billion in overseas aid for two years in 2022, but this additional spending boost will end this financial year.
As a result, foreign aid spending is forecast to fall from £15.3 billion, or 0.58 per cent of GNP, in 2023 to £13.6 billion, or 0.50 per cent of GNP, in 2024. This represents a decrease of £1.7bn. The exact figure depends on the size of the economy this year.
The decline is highlighted by the fact that more than a quarter of the aid budget in recent years has been spent on caring for asylum seekers arriving in the UK, including rising hotel bills.
The spending officially counts as overseas aid under the Organization for Economic Co-operation and Development’s definition, but critics say it breaks the spirit of the commitment.
Mr Lammy and Development Minister Anneliese Dodds are understood to be pressing the Treasury for more aid money.
State Department and Treasury spokespeople did not dispute that there was a disagreement over aid spending. No comment was made by either ministry, citing live Budget discussions.
The International Rescue Committee UK, the British arm of the refugee aid agency run by former foreign secretary Miliband, who was once nominated to lead the Labor Party, signed a private letter protesting the cuts last month.
Mr Mitchell, who has long advocated for higher aid spending, called on the Treasury to approve more money, warning of the impact on poor children if there is no change.
“The huge cost of asylum seekers in the first year falls within the definition of an international development budget, but it is a huge amount of money,” he told The Telegraph.
“That’s why Jeremy Hunt as chancellor and the Treasury were persuaded to give us an extra £2.5bn over the last two years.
“The costs have increased even more since then. The Treasury needs to help in this regard.
“If Rachel Reeves does not provide additional money, the impact will be that thousands of children in developing countries will suffer severely.”
Romilly Greenhill, chief executive of Bond, the UK’s network of organizations working on international development, said the country had a “moral duty” to help those suffering abroad.
The organization published analysis last month showing that if Britain’s refugee spending was removed, its foreign aid budget would fall to its lowest level since 2007.
Ms Greenhill said: “We are concerned that the UK aid budget will fall to its lowest level in 17 years if the government does not act in the autumn budget.
“As global crises such as climate change, conflict and food insecurity worsen, the Government must stop diverting UK aid to fund the UK’s failing asylum system.
“We need a separate, dedicated fund to support these marginalized groups in the UK. “The UK has a moral duty to ensure that millions of people around the world can still access the vital services and support they need to stay safe in their own countries.”