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

Britain’s aid watchdog has hit out at the government for running the UK’s international development budget without “an overarching strategy or set of priorities” – warning that billions intended to fight global poverty have been used to support refugees within the UK.

A new report by the Independent Commission for Aid Impact (ICAI) said the system used to manage Britain’s aid budget in recent years had been overly focused on hitting a precise spending target rather than delivering clear development goals.

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

At the same time Britain cut spending from the legally enshrined target of 0.7 per cent of national income to 0.5 per cent in 2021 after the Covid-19 pandemic. In February last year prime minister Sir Keir Starmer then announced a further reduction to 0.3 per cent from 2027 to fund further defence spending.

ICAI said these pressures had been compounded by the growing share of aid money used to cover the cost of supporting refugees and asylum seekers in the UK. In 2024 those costs reached £2.8 billion, around a fifth of the entire aid budget, and £1bn more than Britain spent on humanitarian aid overseas during that year.

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

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

With the aid budget continuing to shrink, he said ministers would face increasingly difficult decisions about how the remaining funds are spent. “As the aid budget shrinks and ministers have to make hard choices, independent scrutiny will be essential to ensure what remains of UK aid is delivering meaningful results for people who need it most,” he said.

Under international rules set by the Organisation for Economic Co-operation and Development (OECD), some of the costs of supporting refugees during their first year in a host country can be counted as aid. However, ICAI said the UK had taken a broader interpretation than a number of comparable countries.

The report found that the Home Office has used aid funds to cover large parts of the cost of renting asylum hotels, even when some rooms remained empty. ICAI estimates that nearly £50m of aid money went towards unused hotel rooms in December 2023 alone, equivalent to around £600m across a full year.

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

Adrian Lovett, UK executive director of the ONE Campaign, a global NGO founded to fight poverty, said the report raised serious questions about how the remaining aid budget was being used. He told The Independent: “At a time when the UK aid budget has already been slashed to the bone, every pound should be spent with a relentless focus on impact for the world’s most disadvantaged people.”

Instead, he argued, the system had too often been shaped by “short-term pressures and quick fixes.” He added: “It’s wrong that aid earmarked 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 representing UK aid organisations, said he was concerned by the report’s warning that money diverted to cover asylum costs might not be returned to the aid budget if those costs fall.

“We are disappointed by the report’s warning that, in the event of an underspend on asylum support, the Home Office are not obligated to restore these diverted funds back to the UK aid budget,” he said.

While supporting refugees in Britain was essential, Mr Rabinowitz added, those costs should be budgeted separately rather than taken from scarce aid funds. “Every penny must count towards reducing poverty and supporting marginalised communities worldwide,” he said.

This article has been produced as part of The Independent’s Rethinking Global Aid project