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Blog: DFID 2.0 – What could the future hold?

In this second blog of two, Andy Sumner of King’s College London asks what a change of government in the UK might mean for UK development cooperation and policy: will a new DFID rise from the ashes? Will ODA spend rise back to 0.7% pf GNI? And what might a change of government mean for UK development co-operation’s policy focus?

The billion-dollar question: Will there be a DFID 2.0?

So, is DFID coming back? The short answer it seems is probably not, at least not in the sense of a new ministry. The shadow Labour team is conducting an internal review before the election. The big strategic questions will be: will the new government focus attention closely on poverty and poverty in the poorest countries or something else? Is there to be a strong emphasis on ODA or ODA-plus’ (i.e. policies as well as spending)? And how will climate change be integrated?

There are four options at least, each with different degrees of upheaval versus gains:

First, the ‘DFID 2.0’ model: A new ministry would involve significant cost and upheaval for an incoming and inexperienced government and could attract much public and media attention to spending overseas amid likely austerity at home. Global trends are also heading in a different direction given the context of the geopolitical turn in development policies. It is though more likely with a coalition government as there is clear support for a new ministry from the Liberal Democrats.

Second, the ‘FCDO-does-development’ model: This would maintain the FCDO and incorporate a stronger development angle within it, such as coherence and cross-government ownership. The White Paper seemed to be heading in this direction. In short, this is the easiest option politically, but it wouldn’t change much.

Third, the ‘DFID-within’ model: This is a step further and would establish an independent development agency with policy and implementation but within the FCDO. So, some freedom but not too much from foreign policy. And at least a voice in cabinet albeit through the Foreign Secretary.

Fourth, a USAID Model: This would create a new development agency outside FCDO, but policy would stay with the FDCO, and implementation would be with the new agency. Again, some freedom but not too much from foreign policy. However, this could relegate development policy politically if there were no cabinet voice.

Which option you see as the best option depends on how important you see a cabinet voice and your appetite for upheaval, but also the level of risk that is implied in drawing attention to ODA at a fiscally constrained and thus politically sensitive moment (which might undermine public support for ODA in the longer term).

Will there be a return to 0.7% in UK aid spending?

The short answer seems to be a resounding ‘no’, at least not for a (long) while. There is again an internal review planned by the Shadow Labour team, which will set out the ‘economic tests’ for return to 0.7% of gross national income (which may be similar to the current government’s conditions of not borrowing for day-to-day spending and underlying debt is falling). Or the tests could allow some political wriggle room, given that the UK’s fiscal problems are dire, without more taxation or borrowing (or probably both), and with major austerity almost inevitable.

Slow economic growth also means the absolute value of UK ODA won’t rise much either. That said, the current £13 bn/year is 0.5% reduced from the legal requirement of 0.7 as a ‘temporary measure’. That said, it is still high relative to others. It is above the OECD DAC average and EU average.

The thorny issue will be what is included in that amount. What is counted by donors as ODA is an issue for all donors. Currently approaching £4bn of refugee housing costs within the UK is included as UK ODA or about 30% of all UK ODA. This is mainly for Ukrainian refugees (incidentally, Ukraine is also now the second largest recipient of bilateral UK aid, just behind Afghanistan’s).

One question is whether a new government would ever go below the 0.5 which is set as a minimum by the current government. There hasn’t been a public commitment by Labour to stay at 0.5 that I have seen though maybe it is implicit. It seems unlikely as changes would need a parliamentary vote at least, possibly repeal of the 0.7 legislation.

Here’s the rub: does a new government continue to allow overseas aid to meet the cost of hosting refugees in the UK? If this is not counted UK ODA falls to 0.36% of GNI (£9b/year). Or does a new government continue to count it, despite criticising such accounting, in order that UK ODA remains (but not really) at 0.5% of GNI? And it matters a lot as the extra cost of really going back to 0.7 is doubled if the refugee housing cost were to be replaced with new spending. In fact, an extra £8.5bn a year is needed and the chances of £8.5bn/year extra for ODA really seems light years away.

As money is tight there are significant implications for policy. Whether that means a focus on the poorest countries (the politically easy answer, though aid absorption is an issue for aid effectiveness) or more attention to policy coherence (the much tougher thing to do) where ODA will and won’t matter isn’t clear.

What are the signals so far on what a new government might do in terms of policy focus?

If one looks at the keywords in pamphlets, and conference and other speeches from senior Labour figures in the FDCO-related shadow posts, the keywords used seem to resonate well with UK NGO briefings and views, though the detail under the keywords is often limited. Take for a representative example:

The UK will…

• be a development superpower/convenor.
• focus on respect not charity.
• pursue locally led development.
• ensure cross-government thinking.
• integrate development and climate.
• focus on women and girls.

All great in principle, but what the modalities or actions will be to make these concrete is not yet clear. Nor if or how it would be different from the current conservative government. It is likely – or at least an optimist would think – that there is a ferment of ideas under the surface, as Labour prepares for government. There are certainly ideas emerging from the think tanks. And there are some old faces and behind-the-scenes folks from the 2000s likely to be returning to UK politics from the Blair/Brown years. Many special advisors from the 2000s may well be MPs after the next election.

Other flagship policies yet to be assessed for their development angle (I haven’t seen any analysis) include: the five ‘missions’ for UK (do they apply to development cooperation?), the establishment of a new GB Energy Company (would it have investments in the Global South?), the Green Prosperity Plan (major sourcing of inputs needed from the Global South?) and a planned Supply Chain Commission (ditto).

In conclusion, what can we see in the crystal ball?

First, the prospect of a DFID 2.0 as a new ministry seems unlikely. A second best is the ‘DFID-within’ which is probably best of the alternatives given the political importance of retaining of a cabinet voice of some kind.

Second, the immediate return to the 0.7% commitment won’t happen for some considerable time, and so the future of UK development hinges on presumably maintaining at 0.5% of GNI (a public commitment on that would be good) and spending differently, and ideally not including in ODA counting things that aren’t really ODA. The fiscal constraints could also mean UK policy has a greater emphasis on only very poor countries or policy measures beyond ODA spending.

Third, while Labour’s oft-repeated keywords and phrases align well with statements from UK NGOs, their level of generality raises questions about what would really change compared to the conservative government. And there is too little attention at least in public on the immediate crisis of debt servicing, which will get worse and likely be acute over 2025/2026.

Finally, there’s the really wild card. If the UK election is in mid/late November, it’s possible the new government would establish itself in a world where Donald Trump has won re-election to the White House and his threats to leave international institutions may become real. That would make the UK’s international and development cooperation policies as important as ever. With the world looking for global leadership outside the US, a new UK government and like-minded other governments will need to decide if they want to become the keepers of the multilateral flame.

This blog first appeared on the From Poverty to Power website.

Note:  This article gives the views of the author/academic featured and does not represent the views of the Development Studies Association as a whole.