UK aid spending lacks clear priorities and often isn’t value for money, watchdog warns

Britain’s aid watchdog has slammed the government for running the UK’s international development budget without “a comprehensive strategy or set of priorities”; He warned that billions of dollars meant to tackle global poverty were being used to support refugees in the UK.

A new report The Independent Commission for Aid Impact (ICAI) has said that the system used to manage the UK’s aid budget in recent years has been overly focused on meeting a precise spending target rather than clear development targets.

The review looked at how official development assistance (ODA) was distributed between government departments between 2021 and 2025. It found that decision-making often focused on ensuring the UK met its percentage of aid spending rather than allocating money based on long-term priorities or evidence of value for money.

At the same time, after the Covid-19 outbreak, England reduced spending from the legally set target of 0.7 percent of national income to 0.5 percent in 2021. In February last year, Prime Minister Sir Keir Starmer announced a further reduction to 0.3 per cent from 2027 to fund more defense spending.

The increasing share of aid money used to cover the cost of supporting refugees and asylum seekers in the UK is adding to these pressures, ICAI said. By 2024 these costs have reached £2.8bn; this is around a fifth of the entire aid budget and £1bn more than the UK spent on overseas humanitarian aid that year.

The watchdog said combining these “demand-driven” domestic costs with overseas development spending distorted policy choices and undermined transparency. As asylum spending depends on the number of arrivals each year, it could lead to sudden changes elsewhere in the aid budget.

ICAI commissioner Harold Freeman, who led the review, said the government had begun making reforms but warned they needed to deliver real improvements. He said: “The government has taken important first steps in reforming the way it manages aid targeting and we welcome its commitment to making funding more predictable. But reform must deliver real change and improve value for money.”

He said ministers would face increasingly difficult decisions on how to spend remaining funds as the aid budget continues to shrink. “As the aid budget shrinks and ministers are forced to make difficult choices, independent review will be vital to ensure that what remains of UK aid delivers meaningful outcomes for the people who need it most,” he said.

According to international rules set by the Organization for Economic Co-operation and Development (OECD), part of the cost of supporting refugees during their first year in the host country can be counted as aid. But ICAI said the UK received a broader interpretation than many similar countries.

The report found that the Ministry of Internal Affairs used aid funds to cover a large part of the rental cost of asylum hotels, even if some rooms remained empty. ICAI estimates that around £50 million of aid money went to unused hotel rooms in December 2023 alone, equivalent to around £600 million for the full year.

Among the five recommendations, the watchdog called on the government to introduce multi-year commitments to make funding more predictable, called the formal separation of refugee costs from the rest of the aid budget.

Adrian Lovett, UK chief executive of the ONE Campaign, a global NGO set up to tackle poverty, said the report raises serious questions about how the remaining aid budget is being used. “At a time when the UK’s aid budget is already cut to the bone, every pound needs to be spent with a relentless focus on its impact on the world’s most disadvantaged people,” he told The Independent.

Instead, he argued, the system was mostly shaped by “short-term pressures and quick fixes.” He added: “It is wrong that aid meant for humanitarian disasters is being spent by the Home Office on empty hotel rooms here in the UK.”

Gideon Rabinowitz, policy director at Bond, the network that represents charities in the UK, said he was concerned by the report’s warning that money transferred to cover asylum costs could not be returned to the aid budget if those costs fell.

“We are disappointed by the report’s warning that if underspending is undertaken on asylum support, the Home Office is not obliged to return those diverted funds back to the UK aid budget,” he said.

Mr Rabinowitz added that it was essential to support refugees in the UK, but these costs should be budgeted separately rather than covered from scarce aid funds. “Every penny needs to be used to reduce poverty and support marginalized communities around the world,” he said.

This article was produced as part of The Independent. Rethinking Global Aid project