Close to half of the newly-reduced UK aid budget is in line to be spent on housing asylum seekers in Britain, according to a Financial Times analysis of government spending plans and warnings from officials.
Sir Keir Starmer announced on Tuesday that he would cut aid spending from 0.5 per cent of gross national income (GNI) to 0.3 per cent by 2027 in order to fund a rise in defence spending from 2.3 per cent of GDP to 2.5 per cent.
Based on current projections for GNI, the reduced aid budget in 2027 would be £9.2bn, according to calculations from the House of Commons Library.
During 2023, the last year for which figures are available, £4.2bn — or 28 per cent — of the aid budget was spent domestically on refugees, almost entirely to cover hotel costs for asylum seekers waiting for claims to be processed in the UK.
Despite efforts to reduce the bill by clearing the claims backlog, government officials expect spending on asylum hotels to remain high in the short term — leaving it on track to devour about 45 per cent of the reduced aid budget.
“The actual figure spent on aid is going to be really, really small,” warned one official, unless the government takes action to fund it from another budget. The official predicted the sum spent overseas could be as little as half the aid pot.
Some Labour MPs reacted with anger at the prospect of the majority of aid spending being used domestically.
Sarah Champion, Labour chair of parliament’s international development committee, said she was “hugely concerned there is currently nothing to compel the Home Office to reduce its [official development assistance] spend” unless it is forced to pay the bill itself.
“The money needs to come from the Treasury, not from raiding money designed for the poorest countries in the world,” she added. “As it stands, half the remaining foreign aid budget will be spent in the UK.”
Labour MP Joe Powell told the FT: “While the percentage of national income spent on aid goes down, the raid by the Home Office also needs to go down, so more of what’s left is spent on ‘real’ aid overseas.” He described spending on asylum accommodation as a “horrendous waste of taxpayer money”.
The Conservative-Lib Dem coalition government started using the aid budget to fund its asylum system in Britain in 2014, spending £135mn. The Foreign Office wants more of the financial burden of asylum seeker accommodation to be shouldered by the Home Office or by extra funding from the Treasury.
Home Office officials have pushed back against suggestions they could foot more of the bill from their departmental budget, or cut the bill quickly overall. One said: “We have a statutory duty to provide accommodation to those facing destitution, so that cannot be cut.”
The Home Office was one of the departments hit hardest in the Autumn Budget last October, which set out plans to cut spending on the asylum system by £4bn in two years.
Though Starmer has pledged to end the use of asylum hotels altogether, immigration minister Angela Eagle conceded last month that the total number of hotels contracted by the government has increased since the general election last July from 213 to 220. She added at the time that nine were scheduled to be shut by the end of March.
The UK’s bilateral overseas development aid was £10bn in 2023, accounting for 65 per cent of the total budget, while funding to multilateral organisations such as UN agencies was £5.34bn, accounting for 35 per cent.
In 2024-25, the top 10 nations allocated country-specific aid from the UK were Ukraine, Ethiopia, Afghanistan, Syria, Yemen, Somalia, Sudan, South Sudan, Palestine and Nigeria.
Starmer told MPs on Wednesday that it was a “painful” but necessary decision to cut the aid budget and added that he wanted to restore it “as soon as we’re able to do so”.
He said the government would “fulfil our humanitarian obligations in relation to Gaza, Ukraine and Sudan”, but gave no other details of where cuts would fall.
The prime minister’s spokesperson indicated that no other decisions have yet been taken, as every line of aid expenditure is being reviewed for the first time in 17 years as part of the cross-Whitehall spending review that is due to report in June.
Several UK government officials said they anticipated funding for bilateral country programmes to be heavily cut, while international climate finance commitments were among items more likely to remain intact.
High performing multilateral bodies, such as the global vaccine programme Gavi and the Global Fund, are expected to maintain UK funding, while organisations viewed on Whitehall as less impactful, including the UN aid and development agencies, could see their contributions from Britain cut.
Some content could not load. Check your internet connection or browser settings.
Foreign Secretary David Lammy commissioned a review by Baroness Minouche Shafik on the government’s approach to international development last year. Although submitted weeks ago, a summary of her findings is yet to be published.
She had recommended the UK bring more focus to its bilateral assistance, offering bigger amounts of cash to a smaller number of nations, in order to build deeper partnerships and achieve mutual benefit, according to people briefed on the report.
Starmer was challenged over his decision to slash the aid budget at Prime Minister’s Questions, with veteran leftwing MP Diane Abbott warning it would make people “less safe, not more”.
However, the move has met with tacit acceptance from most Labour MPs, with some privately echoing Starmer’s argument that it is a necessary move to funnel more cash towards defence. Polling by YouGov showed that 64 per cent of Britons want to cut overseas aid, while Reform and the Tories have also argued for a reduction to the budget.
A government spokesperson said the state “has a clear plan to reduce the costs of the asylum system and ensure the impact on overseas aid is reduced”.
