8 2GM Thursday November 26 2020 | the times
News
Rishi Sunak announced plans for legis-
lation that could mean years of foreign
aid budget cuts to plough billions of
pounds back into the economy,
prompting a ministerial resignation.
The chancellor said the reduction
from 0.7 per cent of gross national in-
come to 0.5 per cent was temporary, but
did not say for how long. He said that it
was the government’s “intention” to re-
store the target “when the fiscal situa-
tion allows”, arguing that it was “diffi-
cult to justify” at a time of record bor-
rowing because of the coronavirus.
Baroness Sugg, a Foreign Office min-
ister whose brief included sustainable
development, resigned soon after the
announcement, saying that promises
should be kept in the “tough times as
well as the good”.
The government now faces a rebel-
lion from Tory MPs and senior party
figures over the foreign aid cut. The
Times has been told that David Camer-
on, the former prime minister, made
clear in a text message to Boris Johnson
this month that he was prepared to “go
to war” over the issue.
In her resignation letter to the prime
minister, Lady Sugg wrote: “Many in
our country face severe challenges as a
result of the pandemic and I know the
government must make very difficult
choices in response. But I believe it is
fundamentally wrong to abandon our
commitment to spend 0.7 per cent of
gross national income on development.
This promise should be kept in the
tough times as well as the good.
“Given the link between our develop-
ment spend and the health of our eco-
nomy, the economic downturn has
already led to significant cuts this year
and I do not believe we should reduce
our support further at a time of unprec-
edented global crises.”
All five living former prime ministers
have criticised the cut in foreign aid,
which when calculated in terms of the
2018-19 figures would save £4 billion.
Mr Cameron said: “Abandoning the
0.7 target for aid would be a moral, stra-
tegic and political mistake. Moral,because we should be keeping our pro-
mises to the world’s poorest, not break-
ing them. A strategic error, because we
would be signalling retreat from one of
the UK’s vital acts of global leadership.
And a political mistake because the UK
is about to chair the G7 and important
climate change negotiations.”
Dominic Raab, the foreign secretary,
who has been fighting against the cut,The countries with the poorest
populations are the main targets for
British aid, but defending this can be a
challenge when those nations have
wealthy elites keener to invest in
weapons than to relieve poverty.
The top direct recipient of British aid
is Pakistan, a nuclear power that gets
£295 million a year. Aid experts have
argued that, with 60 million people
living in poverty and two thirds of
women illiterate, Pakistan cannot be
ignored in any programme to help the
world’s poor.
However, Sir Michael Barber, when
he was a British aid envoy to Pakistan,
reported that “a relatively small elite”,
who sent their children to private
schools to learn polo, had “not just
failed to prioritise education for the
masses, it had consciously neglected it”.
There are also questions about how
aid money is spent. Officials at the
Department for International
Development, which was abolished in
September this year, kept erecting
school buildings for 120,000 children in
Pakistan even after they had been
warned that they could collapse during
earthquakes.
Bangladesh, Nepal and Afghanistan
are other big beneficiaries of British aid
in Asia. India, another nuclear power,
gets £72 million for infrastructure,
transport and clean energy.
China, the world’s second largest
economy, is given tens of millions a
year, including £24 million that is spent
on campaigns to discourage shoppers
from buying products made from
pangolins, which are at risk of
extinction. Beijing also gets money for
research grants and to reform its
business environment, even as Chinese
spies are accused of hacking secrets to
damage the British economy.
Indonesia, which has a partnership
with Britain to combat climate change,
gets £99 million a year. Among other
middle-income countries, Brazil gets
£16 million and South Africa, where the
money has been spent on grants toresearch jazz, gets £15 million. The
biggest recipients in Africa are Nigeria,
Ethiopia, Yemen, Somalia, Tanzania
and South Sudan.
Britain is the only big country that
hits the United Nations target to spend
0.7 per cent of its income on aid,
amounting to £15 billion last year. Some
countries with smaller economies,
including Turkey, Luxembourg,
Norway, Sweden and Denmark, give
larger proportions but in cash terms,
Britain is only outspent by the United
States and Germany.
Officials often struggle to reach
Britain’s aid target and it may proveForeign aid could be cut
for years, says chancellor
Steven Swinford Deputy Political Editor
Francis Elliott Political Editor
said that foreign aid spending “remains
high in historic terms”. In an article in
the Financial Times he said that in
future his department would assume
“oversight and control” of the vast
majority of the foreign aid budget.
The Foreign, Commonwealth and
Development Office controls about
75 per cent of the government’s foreign
aid spending. This could rise to more
than 90 per cent.
Mr Raab also pledged to cut back on
the use of “expensive consultants” to
help with foreign aid spending and in-
stead focus on “greater in-house project
management expertise”.
Jake Berry, a leading figure in the
Northern Research Group of Tory MPs
representing so-called former red wall
seats, welcomed the cut.
Many other Conservatives, however,
criticised the withdrawal of billions of
pounds from countries struggling to
cope with the pandemic. The Arch-
bishop of Canterbury, the Most Rev
Justin Welby, said that it was “shameful
and wrong” to withdraw funding from
the world’s poorest.
With no commitment to returning to
the promise next year, the government
must now change the law to drop the
0.7 per cent aid figure, and faces a battle
in both the Commons and the Lords.
Andrew Mitchell, a former develop-
ment secretary, said the cut would lead
to “100,000 preventable deaths, mainly
among children”. The cut is opposed by
Mr Cameron and Theresa May as well
as by Ruth Davidson, who was the Scot-
tish Tory leader until last year.
Tobias Ellwood, chairman of the de-
fence committee, warned that China
and Russia were likely to extend their
“authoritarian influence” into the “vac-
uum” created by the UK “downgrad-
ing” its soft power programmes.Highest debt since 1959
Britain’s debt mountain has left the
country at risk of an economic shock,
the government’s budget watchdog
has warned.
Debt will hit its highest level since
1959, at 109 per cent of national
income, as the state borrows close to
£1 trillion across the parliament to
tackle the pandemic, the Office for
Budget Responsibility (OBR) said
alongside the spending review.
Interest rates have been cut to a
record low of 0.1 per cent, which
makes the debt affordable for now.
However, the scale of borrowing,
which will hit £2.7 trillion in 2025,
“has increased the vulnerability of the
public finances to future economic
shocks”, the OBR said.
A rate rise to just 1.1 per cent would
add £12 billion to the cost of servicing
the debt, the OBR said. A 2p increase
in the basic rate of income tax would
be needed to cover that sum.
Markets may also lose faith in the
government’s ability to manage the
debt, which would also force a rise inborrowing costs. A one percentage
point increase in market rates would
add £9 billion to the cost of servicing
the debt, OBR analysis showed.
Mel Stride, chairman of the Trea-
sury select committee, said: “The
medium-term risk is that interest
rates don’t stay nailed to the floor. If
markets didn’t think there was a cred-
ible plan to get the deficit under con-
trol, it could push them higher.”
The OBR’s forecasts show that the
government does not bring the deficit
under control at any point in this
parliament. Underlying debt, exclud-
ing the temporary effects of non-gov-
ernment measures, is still rising as a
share of national income in 2026.
Across this parliament, the govern-
ment will borrow £863 billion,
£562 billion more than was forecast in
March. Despite the big increase, the
total cost of servicing the debt is
£69 billion lower owing to reduced
interest rates.
Next year, debt servicing will be just
1.7 per cent of government revenues
from tax and other sources, a postwar
low.Philip Aldrick Economics EditorCash for countries that ignore their own poor
How much other nations shell out
Official development
assistance by
percentage of gross
national income, 2019
Turkey 1.
Luxembourg 1.
Norway 1.
Sweden 0.
Denmark 0.
United Kingdom 0.
Germany 0.
Netherlands 0.
Saudi Arabia 0.
United Arab Emirates 0.
Switzerland 0.
France 0.Belgium 0.
Finland 0.
Ireland 0.
Japan 0.
Malta 0.
New Zealand 0.
Austria 0.
Canada 0.
Iceland 0.
Italy 0.
Australia 0.
Hungary 0.
Cyprus 0.
Spain 0.
Greece 0.
Slovenia 0.United States 0.
Portugal 0.
South Korea 0.
Estonia 0.
Czech Republic 0.
Slovak Republic 0.
Poland 0.
Lithuania 0.
Bulgaria 0.
Romania 0.
Latvia 0.
Israel 0.
Russia 0.
Taiwan 0.
Thailand 0.
Source: OECDeasier to cut than to spend. The
Independent Commission for Aid
Impact has reported stakeholders’
impressions of Britain “shovelling
money out the door” to meet the target.
CDC Group, the government’s
development finance arm, has been
attacked by anti-poverty campaigners
for investing in enterprises such as
coffee shops, a celebrity chef's
cookware brand and luxury hotels. Few
aid workers would shed tears if it lost
some of the £730 million a year it gets.
Dominic Raab has indicated that
Britain’s priorities with a shrinking aid
budget will be the world’s poorest,
climate change, biodiversity, girls’
education, the coronavirus, media
freedom, religious freedom, science
and research.
Aid insiders said yesterday that a
practical option would be to reduce the
use of promissory notes, IOUs giving
legally binding commitments to pay an
international organisation in the
future. These count towards spending
in the year in which they are issued,
rather than when the money is spent.
They account for up to a fifth of the aid
budget and about £5 billion now lingers
in the coffers of global bodies waiting to
be used.
Bond, the international development
organisations’ network, has called for
scarce money to be spent on saving
existing projects, rather than on issuing
notes for the future.
We can’t afford aid, letters, page 32Dominic Kennedy Investigations Editor
frontline health
Nurses, doctors and other NHS staff
can expect pay rises next year,
unlike many of their colleagues in
the public sector, although they will
probably not be as large as unions
had hoped for. Core health spending
will rise by £6.6 billion, keeping
government promises. A £2.3 billion
NHS capital boost will be welcomed
by frontline staff who say their
ability to provide safe care is being
hampered by outdated facilities. But
the cash increases still fall below
what many analysts say would be
needed to bring about real
improvements.coronavirus initiatives
Test and Trace has been handed
£15 billion for next year, despite
scepticism about its performance,
and another £733 million has beenNews Spending review
Rishi Sunak delivers
his spending review
to the Commons
yesterday. He faces a
rebellion from MPsWho wins
and loses
in Sunak’s
grand plan?
Winners