2004 Spending Review

PN A9

12 July 2004

Further boost to UK Aid Budget

Total UK official development assistance (ODA) will rise to almost £6.5 billion by 2007-08, representing a real terms increase of 140 per cent since 1997, the Chancellor announced today. ODA will have risen from 0.26 per cent of Gross National Income (GNI) in 1997 to 0.42 per cent in 2006-07 and 0.47 per cent in 2007-08. The Government wishes to maintain these rates of growth and on this timetable would reach 0.7 per cent of GNI by 2013. If Britain’s proposal for an International Finance Facility were adopted, the objective of 0.7 per cent could be achieved earlier, by 2008-09.

The UK will continue to ensure that 90 per cent of its bilateral aid goes to the world’s poorest countries where it is needed the most and will increase aid to Africa by £1.25 billion per annum by 2008 and spend at least £1.5 billion on HIV/AIDS.

The Secretary of State for International Development, Hilary Benn, said today:

“This is an excellent settlement, which demonstrates the Government’s continuing commitment to tackling global poverty and reaching the 0.7 per cent oda/GNI target. These additional resources will be used to increase UK bilateral aid to Africa to at least £1.25 billion a year by 2008, spend at least £1.5 billion on HIV/AIDS related work over the next three years, and ensure that more children in the world’s poorest countries are able to go to primary school”.

Details

Department for International Development (DFID), whose budget will increase to more than £5.3 billion a year by 2007-08, from £3.8 billion today, an average annual increase of 9.2 per cent in real terms over the three years of the Spending Review period, following average real-terms increases of 6.2 per cent and 8.1 per cent in the 2000 and 2002 Spending Reviews.
DFID will continue to focus its resources on improving healthcare and education in developing countries, both of which underpin the Millennium Development Goals (MDGs). The UK will spend at least £1.5bn over the next three years on bilateral and international efforts to combat HIV/AIDS;
This settlement will substantially increase UK funding to the International Development Association (IDA), the concessional arm of the World Bank, building on the £1 billion committed during the last replenishment round, when the UK became the fourth largest donor to IDA; and
Spending will continue in other essential areas such as conflict prevention, strengthening good governance and making long-term commitments to support those countries which effectively implement their own Poverty Reduction Strategies.
The Government’s proposal for an International Finance Facility (IFF) would frontload donor commitments and leverage in additional money from the international capital markets by issuing bonds, based on legally binding long-term donor commitments.
The IFF is the only mechanism that will deliver in the immediate term the additional $50 billion a year needed to meet the MDGs, and the UK is pursuing it in concert with its long-term objective to reach 0.7 per cent. With the IFF, the UK could achieve the equivalent of 0.7 per cent as early as 2008-09.
DFID will achieve total efficiency gains of at least £310 million a year by 2007-08, through an improvement in the effectiveness of international aid, redeployment of resources to key priority areas, and savings on administration costs, including a reduction of 170 Civil Service posts and more effective procurement.
This will make UK aid more effective and will in no way impact upon UK commitments to increase aid to the world’s poorest countries.

Department for International Development	£ million
	2004-05	2005-06	2006-07	2007-08
Department for International Development
Resource Budget	3,780	4,529	5,028	5,323
Of which Administration Budget	222	239	235	232
Capital Budget	18	14	20	22
Total Departmental Expenditure Limit¹	3,777	4,529	5,028	5,323
Memo: Africa Conflict Prevention Pool	60	60	63	64.5
1 Full resource budgeting basis, net of depreciation

Official development assistance	£ million
	2004-05	2005-06	2006-07	2007-08
Total UK official development assistance	4,141	4,889	5,521	6,460
oda as a proportion of GNI (per cent)¹	0.35	0.39²	0.42	0.47
1 An internationally agreed statistic for measuring aid flows to developing countries. The Development Assistance Committee (DAC) of the OECD defines what activities score as ODA 2 The 2002 Spending Review settlement predicted total UK oda would reach 0.40 per cent of GNI by 2005-06. In real terms, UK oda spending in 2005-06 will remain the same and the Government will deliver its commitment to increase the UK aid budget. However, due to faster than predicted growth in the economy it is now anticipated that the UK may just miss the 0.40 per cent oda/GNI forecast in 2005-06.

Notes for editors

DFID’s Public Service Agreement (PSA) for 2005-08 has been built around the MDGs, and can be found on the HM Treasury website
Media enquiries please contact HM Treasury press office on 020 7270 5238.