Thinktank estimates ODA spending will rise by £1bn during the course of next parliament

Poverty reduction in the world’s poorest countries risks being diluted by the government’s increasing tendency to devote a bigger slice of Britain’s aid budget to pursuing the national interest, the Institute for Fiscal Studies has warned.

The thinktank estimated that overseas development assistance would rise by £1bn during the course of the next parliament as a result of Theresa May’s pledge to continue meeting the United Nations 0.7% aid target.

But it said that in recent years less of ODA spending was being channeled through the Department for International Development, with a growing emphasis on ensuring UK firms benefited.

Foreign aid 0.7% pledge will remain, says Theresa May Read more

In a pre-election analysis, the IFS said Britain’s spending on aid had almost doubled since Tony Blair promised to meet the UN target at the Gleneagles summit in July 2005. Spending had risen in inflation-adjusted terms from £7.4bn to £13.6bn in 2016 and was on course to reach almost £15bn by 2021.

Cross-party adherence to the 2005 promise meant that DfID was spared the austerity that affected most government departments after the Conservative-Liberal Democrat coalition came to power in 2010, the IFS said.

DfID’s budget had risen by 24% between 2010-11 and 2015-16, while the average cuts for departments outside of the NHS, education and defence were 28%.

But the IFS said there had been a change of emphasis since 2015, with more than a quarter of the aid budget now being spent outside DFID in 2016 up from 14% two years earlier.

“So far Theresa May has made it clear that if she wins the election she will uphold the UK’s commitment to spending 0.7% of GNI [gross national income] on ODA”, the IFS report said. “However, across the main parties, there has been little indication of how this money will be spent and what balance they will aim to strike between national interest and global poverty alleviation goals in UK aid spending going forward.”

May has been under pressure from some of her own MPs and from Conservative-supporting newspapers to cut aid spending, but announced last month that she would be renewing the 0.7% pledge. Diverting some of the money to other departments – such business, energy and industrial strategy – is seen as a way of blunting the attacks.

The IFS said that despite criticism of aid being squandered, overseas assistance was the most heavily scrutinised part of government spending, with oversight from the International Development Committee, the National Audit Office and the Independent Commission for Aid Impact.

Sonya Krutikova, an author of the IFS report, said: “The UK is now recognised internationally as leading on shaping the global development agenda and the Department for International Development scores highly on the international Aid Transparency Index.

“A change of strategy since 2015 means that more emphasis is now put on using ODA spending for the UK’s national interest. There is clearly a trade-off between this, spending outside of ODA altogether, and ensuring the money is used most effectively for global poverty alleviation.”