Billions more set to be slashed from overseas aid projects, Save the Children warns

Exclusive: Government told to rethink decision to count costs of Ukraine refugees within shrunken budget to avoid ‘unimaginable consequences’

Billions more will be slashed from overseas aid projects within weeks unless ministers abandon rules diverting a quarter of funds to the costs of Ukrainian refugees in the UK, Save the Children is warning.

The alarm has been raised over a controversial decision to include spending on 118,000 Ukrainians welcomed to Britain within a budget reduced from 0.7 to 0.5 per cent of GDP and then strictly capped.

As the war grinds on, Save the Children estimates the bill will reach £3bn, which would be a staggering 25 per cent of aid spending in 2022, after £4bn has already been slashed from the budget.

The agency welcomes the help for refugees fleeing the invasion, but told The Independent there would be “unimaginable consequences” without an urgent rethink.

“Including those costs within a 0.5 per cent aid budget, which is already fully allocated, will result in further deep cuts in funding for those in the toughest circumstances across the world,” said Richard Watts, senior adviser for development finance.

“This isn’t right. The UK government should ensure its help for refugees here does not come at the expense of support for children across the world at this critical time. It can and must step up, and not back.”

Ministers have already ordered a stop to “non-essential” aid spending – partly because of the ballooning Ukraine costs – with agencies still in the dark over existing projects, with just four months left in the calendar year.

The Independent understands that Liz Truss is on course to break a government pledge to restore the 0.7 per cent aid commitment in 2024, because of her planned £30bn-plus tax cuts that will benefit the wealthy.

The government revealed only in late July that spending on Ukrainian refugees would count as official development assistance (ODA) within the 0.5 per cent cap.

This followed a cabinet tussle in which Ms Truss, the foreign secretary, lost out to home secretary Priti Patel, who is believed to have asked for cash to come from the aid budget.

There is also anger that donations of leftover Covid vaccines are also being counted as foreign aid, slashing an estimated further £300m from this year’s aid spending.

Mr Watts added: “Liz Truss raised concerns about the impact of the Ukraine war on her aid budget and hoped the Treasury would allocate additional funding. If she is the next prime minister, she will be in a position to make that change.”

Sarah Champion, chair of the House of Commons international development committee, said: “It’s absolutely right that we step up to help the people of Ukraine, but we mustn’t abandon our commitment to the world’s poorest in doing so.

“We must show flexibility in increasing the 0.5 per cent target before the costs of providing much-needed help to Ukrainian refugees lead to cuts that will cause real suffering elsewhere.”

And Preet Kaur Gill, Labour’s shadow minister for international development, said: “The UK is rightly united in supporting Ukrainian refugees fleeing Putin’s barbaric and illegal war.

“But diverting aid from the world’s worst crises in a global emergency drives insecurity, extremism and people to flee their homes – leaving the UK exposed and the world less safe.”

However, Ms Truss is poised to win the Tory leadership race on a pledge of substantial tax cuts and must also find a way to bail out households and industry faced with rocketing energy bills.

The Conservatives broke their own manifesto commitment by slashing aid spending from 0.7 per cent of national income, despite a legal commitment to allocate that amount.

The cut was forced through despite warnings that huge numbers of people would die as a result, and it was done in a chaotic fashion in the rush to find immediate savings.

Under pressure, Rishi Sunak, chancellor at the time, promised the 0.7 per cent would be restored in 2024, provided Treasury rules were met, namely no borrowing for day-to-day spending and that debt was falling.

But the Institute for Fiscal Studies, which has attacked Ms Truss’s plans as unrealistic without big spending cuts, is warning that they also have stark implications for aid spending.

Ben Zaranko, a senior research economist at the IFS, warned: “Implementing a large package of tax cuts without accompanying spending cuts would act to push up borrowing.

“If, as seems all too possible, the government was then on track to breach its fiscal rules by a wide margin, that would cast doubt on whether aid spending would still return to 0.7 per cent of GDP by 2024.”

Mr Zaranko pointed out that Ms Truss has hinted at adopting fresh fiscal rules, but she has said nothing about restoring overseas aid during the campaign.

Save the Children expects 190,000 Ukrainians to arrive this year, putting the costs as follows: payments to local authorities (£1.5bn), accommodation (£400m), cash support (£375m), health costs (£500m), education costs (£300m) – just over £3bn in total.

The Foreign, Commonwealth and Development Office pointed to the rules “on what constitutes aid”, set out by the Organisation for Economic Cooperation and Development.

“Support given to asylum seekers or refugees for the first 12 months of their stay in the UK, who originate from eligible countries, counts as aid,” a spokesperson said.