Foreign aid could be slashed to balance the books

Liz Truss - Kirsty Wigglesworth/AP
Liz Truss - Kirsty Wigglesworth/AP

Britain’s foreign aid budget is being targeted for new cuts as part of Liz Truss’s push to find savings across Whitehall.

Rishi Sunak, the former chancellor, had vowed to return spending on overseas aid to 0.7 per cent of GDP by 2024 as part of his plan to bring down debt.

However The Telegraph understands that officials are now expecting that spending increase to be pushed back, possibly to as late as 2027.

The move would create a saving of as much as £5 billion a year - helping the Prime Minister show she has a plan for controlling spending and reducing debt. Ms Truss is under pressure to prove her fiscal responsibility after her tax-cutting mini-Budget was followed by a crash in the pound and market anxiety about the scale of borrowing needed.

But targeting foreign aid would be sure to spark a new Conservative rebellion, given the 0.7 per cent pledge was contained in the 2019 Tory election manifesto and has been written into law.

Andrew Mitchell, the Tory MP who led the rebellion when the 0.7 per cent spending level was abandoned during the Covid-19 pandemic, last night issued a warning shot.

Mr Mitchell told The Telegraph: “Tempting though it may be to further constrain the international development budget, it would certainly not be in Britain’s national interests.

“Were the Government to go back on that commitment to restore the 0.7 per cent aid target by 2024/5 it is unlikely that Parliament would support it.”

Foreign aid spending bone of contention

The amount the Government spends on foreign aid has been a bone of contention on the Tory benches ever since David Cameron became prime minister in 2010.

Mr Cameron promised to meet the target set by the Organisation for Economic Cooperation and Development for developed nations to spend 0.7 per cent to GDP on foreign aid.

The policy was seen by Mr Cameron’s team as a central plank of his party modernisation agenda and is considered by his allies a major achievement of his premiership.

However scores of Conservative MPs have criticised the target in the past, not least when during austerity other areas of public spending - such as on defence - was restricted.

Boris Johnson and Mr Sunak changed approach during the pandemic, saying they would spend 0.5 per cent of GDP on foreign aid given pressures on the public finances.

Mr Sunak, who was chancellor, then agreed to reinstate the 0.7 per cent target - but only when debt was falling and there was no borrowing for day-to-day spending.

The former chancellor said, on his plans, that would be 2024/25. The promise was seen by Tory rebels as a key reason for why their push to immediately re-adopt the 0.7 per cent level failed.

Pressure returns

But there is now fresh pressure on the overseas development aid budget, which is a little over £11 billion this year.

Kwasi Kwarteng, the Chancellor, is a past critic of the target, according to The Times. He will set out the new approach within weeks at a new fiscal statement.

One government insider who will be involved in talks said one option was to delay the increase to 0.7 per cent by years.

“We want it to return to 0.7 per cent as soon as it is practicably possible, but that word ‘practicable’ can be differently defined,” the source told The Telegraph.

Mr Kwarteng has promised to get debt falling in the “medium term” in plans expected to be set out later this month. One source close to discussions said “medium term” could mean around five years.

The return of the 0.7 per cent foreign aid spending target may be pinned to the date when debt is forecast to fall again, which could be 2027 - though no date has been agreed yet.