Why a Cliff Edge Is Better than a Glide Path for the UK’s Aid Cut

As HM Treasury works out how to implement the reduction in the UK’s foreign aid budget to 0.3 percent of the country’s income by 2027, some senior government figures—including ministers—have stressed the importance of a ”glide path” to that figure. A glide path may sound prudent, but a steep drop in 2027 would be better than two smaller cuts across 2026 and 2027. This would give the government more choice on how to apply the likely 34 percent cut, allowing it to bring forward some spending plans with international organisations, and avoid breaking commitments or prematurely curtailing projects. 

One such important international commitment was made just four months ago, to the World Bank’s fund for the poorest countries (IDA). But that commitment was not historically large, and our analysis shows that this contribution remains affordable even within the reduced envelope—and the government should fulfil it (regardless of the US position). 

The government may argue that Prime Minister Keir Starmer signalled aid cuts to fund defence spending and that that principle applies to next year. However, he told Parliament the cut would take effect in 2027, calling it a difficult choice. Bringing part of it forward will mean only a year to implement reductions steeper than those seen under austerity and runs counter to the mutual respect he has promised in international partnerships.

Abrupt changes to aid spend are usually unhelpful…

When international spending has increased we—along with others, including the NAO and Parliament have often emphasized the importance of steady growth to prevent money being rushed out the door. Likewise, when Boris Johnson’s government cut the aid budget from 0.7 to 0.5 percent of Gross National Income or GNI (and when the budget was raided to cover increased costs to support refugees) we (and the IFS) bemoaned the damage done to impact and the UK’s reputation by the cuts being implemented in under a year. 

But this situation is different. 

While the government deserves some credit for announcing a two-year lead time to implement the reduction; this is still a very steep cut being undertaken at short notice. Making a cut in 2026 will exacerbate that. Even if the government manages to reduce the amount of the aid budget it spends on support for refugees down to say, £2 billion by 2027 (from £4.3 billion in 2023 and an estimated £3 billion in 2024); the non-refugee spend will need to shrink by 34 percent in just two years—falling from around £11 billion in 2025 to £7.2 billion in 2027.

The cut to the bilateral budget—the direct assistance the UK provides to specific countries—is likely to be even larger, particularly if international commitments can’t be brought forward. 

To undertake half the cut in 2026, the foreign aid budget would need to be cut by 15 to 20 percent in a single year. For some context, during the austerity spending cuts in the early 2010s, the steepest average annual cut to resource budgets faced by any government department was under 10 percent. A 15-20 percent cut in a single year is extreme—far beyond what domestic departments like education, health, or welfare have faced. Why should the aid budget be treated differently? This is precisely the sort of double-standard for the Global South that foreign secretary has railed against and the prime minister said he’d move past in the spirit of equal respect. 

In fact, it could even be argued that these other departments would be better placed to make such cuts—as while domestically, we can stop capital projects before they start, internationally the government makes multi-year capital commitments to international organizations; and several are predicated on a 0.5 percent GNI budget. It is not easy or desirable to curtail these commitments. 

Is the UK’s IDA pledge still affordable?

Last November the government announced its investment in the World Bank’s fund for the lowest income countries (IDA) with a commitment to £1.98 billion over the three years to mid-2028 (see chart) but has not yet laid the statutory instrument to legally commit. The Labour Government’s development mission—to end poverty on a livable planet—was set to mirror that of the World Bank. The US may step back from its pledge; but our analysis shows that the UK’s commitment is affordable in terms of its share of the reduced ODA envelope (see chart) and the UK should maintain it. The government will also host the Global Fund replenishment later this year as part of its manifesto “commitment to greater multilateral action”.

UK IDA pledges expressed as a share of ODA budget

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Source: World Bank, and OBR GNI data
Notes: To simplify, this spreads each multi-year IDA pledge over 3 years from the first payment year – for example, the latest pledge runs from mid-2025 to mid-2028 but appears above as 2025-27. ODA is reduced to 0.3% in 2027.

Another multi-year commitment potentially at risk relates to climate, one of Labour’s five missions. We understand the government suddenly has doubts about completing the five-year £11.6 billion climate finance target concluding in 2025/26 in order to manage reduced 2026 spending. Missing that target, or even taking an extra year to deliver, would have a clear geopolitical cost and mean others will (fairly) use it as a justification for climate inaction. 

If the government maintains aid spending close to 0.5 percent of GNI in 2026; it would allow it to bring forward payments on those multilateral commitments and so reduce them from 2027. That would enable bilateral commitments to be reduced much more smoothly and predictably, minimizing the need to cut projects before they are complete. So, paradoxically, the steeper the cliff-edge in 2027, the smoother the “glide path” to a lower level of spend.

Increasing defence spend with mutual respect

The benefits of extra defence spending—which are real—must be weighed against the extra costs of not only from the lost impact of curtailing development projects early but also the reputational damage of reneging on commitments.

In short, if the government cuts the aid budget for 2026/27 by 0.1 percent of GNI; that will represent a major cut to be implemented in twelve months.

This is not a glide path. A flat budget in 2026 followed by a cliff edge in 2027 would release some funds for defence and is much better option for a government serious about the Prime Minister’s call for international partnerships based on mutual respect.