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Britain’s foreign secretary David Lammy is pushing for an emergency top-up to development spending as ballooning costs of supporting asylum seekers threaten to drain overseas aid to its lowest level since 2007.
The UK government spent £4.3bn hosting asylum seekers and refugees in Britain in the last financial year, more than a quarter of its £15.4bn overseas aid budget, according to official data. This more than consumed the £2.5bn increases in the aid budget scheduled between 2022 and 2024 by former Conservative chancellor Jeremy Hunt.
People familiar with Lammy’s thinking say he fears that if Rachel Reeves, the chancellor, resists calls to at least match Hunt’s offer, the aid budget will be further eviscerated, undermining the government’s ambitions on the global stage.
Currently, the housing of asylum seekers in hotels is controlled by the Home Office but largely paid for out of the aid budget, a set-up introduced in 2010 when spending on the programme was relatively modest.
In the longer term, development agencies and some Foreign Office officials want the costs capped or paid for by the Home Office itself.
However, such a move would be politically fraught, the people said, as it would require billions of pounds of extra funding for the Home Office at a time the government is preparing widespread cuts across departments.
Sir Keir Starmer, the prime minister, is due to attend a string of upcoming international events, starting with the UN general assembly this month, then a Commonwealth summit in Samoa, a G20 meeting in Brazil, and COP-29 climate talks in Azerbaijan later this autumn.
International partners will be looking at these meetings for signs that the change of government in the UK marks a change in direction on development.
Britain’s leading role was eroded by Rishi Sunak after he cut the previously ringfenced spending from 0.7 per cent of gross national income to 0.5 per cent when he was chancellor in 2020.
“When he turns up at the UN next week and the G20 and COP a few weeks later, the PM has a unique opportunity to reintroduce the UK under Labour as a trustworthy partner that sees the opportunity of rebooting and reinvesting in a reformed fairer international financial system,” said Jamie Drummond, co-founder of aid advocacy group One.
“But to be that trusted partner you need to be an intentional investor — not an accidental cutter.”
Speaking on Tuesday in a speech outlining UK ambitions to regain a leading role in the global response to climate change, Lammy said the government wanted to get back to spending 0.7 per cent of GNI on overseas aid but that it could not be done overnight.
“Part of the reason the funding has not been there is because climate has driven a migration crisis,” he said. “We have ended up in this place where we made a choice to spend development aid on housing people across the country and having a huge accommodation and hotel bill as a consequence,” he said.
Under OECD rules, some money spent in-country on support for refugees and asylum seekers can be classified as aid because it constitutes a form of humanitarian assistance.
But the amount the UK has been spending on refugees from its aid budget has shot up from an average of £20mn a year between 2009-2013 to £4.3bn last year, far more than any other OECD donor country, according to Bond, the network of NGOs working in international development.
Spending per refugee from the aid budget has also risen from an average of £1,000 a year in 2009-2013 to around £21,500 in 2021, largely as a result of the use of hotels to accommodate asylum seekers.
The Independent Commission for Aid Impact watchdog argues that the Home Office has had little incentive to manage the funds carefully because they come from a different department’s budget.
In her July 29 speech outlining the dire fiscal straits that Labour inherited from the previous Conservative government, Reeves projected the cost of the asylum system would rise to £6.4bn this year.
Labour was hoping to cut this by at least £800mn, she said, by ending plans to deport migrants to Rwanda. A Home Office official said the government was also ensuring that asylum claims were dealt with faster and those ineligible deported quickly.
But the Foreign Office projects that on current trends, overseas aid as a proportion of UK income (when asylum costs are factored in) will drop to 0.35 per cent of national income by 2028.
Without emergency funding to plug the immediate cost of housing tens of thousands of migrants in hotels, that will happen as soon as this year, according to Bond, bringing overseas aid levels to their lowest as a proportion of national income, since 2007.
The Foreign, Commonwealth and Development Office said: “The UK’s future [official development assistance] budget will be announced at the Budget. We would not comment on speculation.”
