UK aid cut: Implications for Australia

London: The UK aid budget as a proportion of gross national income is set to fall from 0.5 per cent to 0.3 per cent by 2027 – a 40 per cent decrease. That’s down from 0.7 per cent (the OECD target) prior to 2021. The Chair of the UK’s Parliamentary International Development Committee, a Labour government member, has labelled the decision “deeply shortsighted”.

It’s not just the catastrophic US foreign aid freeze that makes this decision so concerning. The UK is merely the latest European donor to tighten the purse strings, following recent announcements from Belgium, France, Germany, the Netherlands and Sweden.

In isolation, the UK aid cuts are bad but not disastrous for the Indo-Pacific. UK aid programs in the Pacific Islands and Southeast Asia are modest, albeit specialised. The UK spent only $12 million in the Pacific in 2022, down from $24 million in 2020. Since 2015, they’ve been responsible for less than one per cent of spending in the Pacific – quite literally a drop in the ocean. Nonetheless, the UK’s long-running scholarship and capacity-building initiatives are wide reaching and largely well received.

It’s a similar story in Southeast Asia. Despite efforts to deploy an Indo-Pacific “tilt”, the UK is a very minor player, ranking ninth among bilateral donors in 2022. Its aid is targeted to humanitarian assistance for Myanmar and support for programs aimed at improving urban planning and energy management in ASEAN member states.

Despite the limited role UK aid funding plays in the region, there are still serious implications for Australia.

With an election around the corner, Australia needs a bipartisan consensus to increase, or at the very least maintain, its aid budget.

First, though this is a fresh announcement light on details, we can make guesses at where the cuts will come from. The UK, like many other OECD donors but unlike Australia, counts the cost of receiving and supporting refugees towards its foreign aid budget. In 2022, refugee-related costs made up nearly a third of the UK’s total aid spend. This portion is likely to be protected, meaning the share spent elsewhere, in regions like the Pacific and Southeast Asia, is likely to bear the brunt of the cuts.

Second, the UK’s bilateral aid program might be humble in the region, but its contributions to multilateral institutions like the United Nations and World Bank are sizeable, and those multilateral institutions are, in turn, critical in the Indo-Pacific. For example, the World Bank’s fund for low-income countries is particularly vital for the Pacific, and has historically received outsized support from the UK. Reductions in the UK’s contributions to those organisations would have flow-on effects in Australia’s near region.

Third, and most profoundly, the UK isn’t acting alone. Aid budgets across Europe have been slashed, and the world’s largest bilateral aid program – that of the United States – has been frozen with lasting consequences, pending a longer-term decision on its future. In this context, every dollar counts. Starmer’s announcement is another demonstration of a narrowing perception of security, discounting human security in favour of hard security, and even more concerning from a recently elected progressive government.

An increasingly lonely Australia might need to face a hard truth. Australia’s aid-to-GNI ratio barely brushes 0.2 per cent – a third lower than the UK’s new, much-reduced level. Clearly, Canberra can’t expect backing from Europe or the United States in its bid to advance development in the Indo-Pacific.

Whether it’s the UK’s food security fund in Myanmar, or USAID’s HIV vaccination program in Papua New Guinea, these initiatives contribute to the security and stability of Australia’s neighbours. With an election around the corner, Australia needs a bipartisan consensus to increase, or at the very least maintain, its aid budget.

Then US Deputy Secretary of State Kurt Campbell told Prime Minister Anthony Albanese last year: “We’ve given you the lane, so take the lane.” That might have been stronger foreshadowing than he imagined.