Is the EU behind a £1 billion increase in aid spending?

Published: 5th Apr 2015

In brief

Claim

Overseas aid spending will increase by £1 billion over two years because of new EU rules.

Conclusion

The EU rules in question are about how to measure the UK's wealth, which is the basis of the government's aid target. The EU doesn't set that target - we do.

 

"Foreign aid bill to soar by £1bn"

Daily Express, 4 April 2015

"Overseas aid must rise by £1bn in next two years, says Europe"

The Times, 3 April 2015

The Daily Express splashed yesterday on a projected £1 billion rise in the overseas aid budget over the next couple of years, following a story in The Times on Friday.

Both newspapers link the EU to this increased spending; the Daily Telegraph even points to "new European Union rules on overseas spending".

But the new EU rules referred to have nothing to do with overseas aid. And while we give some money to other countries indirectly through the EU, most of the aid that we send abroad is as a result of a decision made by the British government.

So what's going on?

Not from the EU: the UK's overseas aid target

The government has made a commitment to meet a UN target: devoting 0.7% of gross national income (GNI) to overseas aid (or 'official development assistance') every year. British governments have been signed up to this goal in principle since 1974. The UK met the target for the first time in 2013.

The coalition recently passed a law making it a duty of the government to meet the 0.7% target. But it specifically says that the only "accountability" for this duty is to Parliament—meaning that the government can't be taken to court if it fails to meet the spending commitment.

From the EU: changes in how we measure the UK's wealth

To work out whether we've hit the target in a given year, we need to know what GNI adds up to.

This measure of the nation's wealth—similar to gross domestic product (GDP), but not exactly the same—is calculated by the Office for National Statistics.

Here's where the EU enters the picture: these calculations are done on the basis of common European rules. These recently changed, with the effect of pushing GNI up.

For instance, in 2013 the figure for GNI was £32 billion higher than it would have been under the old system of measuring. That's an increase of about 2%.

Putting the GNI back in the bottle

Higher GNI means we need to spend more on aid to reach the 0.7% target. For 2013 and 2014, the Department for International Development worked out that it had hit the target using the old system, but come in just shy of reaching 0.7% of the new measure of GNI.

The difference between what it spent in those two years and what it would need to have spent to reach the target comes to almost £1 billion.

The government won't be making up that shortfall, as it considers that it reached its target on the only measure available at the time. But from 2016, the aid budget will be planned based on the higher measure of GNI.

So it's entirely plausible that £1 billion represents the difference between what would have gone on aid between 2016 and 2018, and what will now be spent.

This projection assumes that the next government will make the same commitment to the overseas aid target as the coalition did.

Old news

Incidentally, this weekend's reporting isn't much by way of a scoop; the Financial Times had this story, based on Office for Budget Responsibility data, in December 2014.


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