Cap foreign aid at £1bn: calculation note

Central fiscal result

-£6.5bn - Net fiscal impact in 2027-28

Low case: -£10.0bn. High case: -£3.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• UK ODA is capped at £1bn annually.
• The baseline reflects the planned move toward 0.3% of GNI.
• Unspecified exceptions are not assumed centrally.
• No replacement security or refugee fund is included.

Affected population

• Affected units are aid programmes, recipients and UK suppliers.
• FCDO and multilateral programmes face the largest cuts.
• Domestic aid contractors and charities lose work.
• UK taxpayers receive the saving.

Gross impact

• 2025 provisional ODA was £13.0bn.
• A £1bn cap implies very large cuts before baseline adjustment.
• Central saving is £6.5bn in 2027-28.
• Low saving assumes broad exemptions and existing cuts.

Fiscal build-up, central case

• ODA programme savings: -£7.5bn
• Contract exit and transition costs: +£0.5bn
• Replacement diplomatic/security spending: +£0.5bn
• Administration and uncertainty: +£0.0bn

Central net impact: -£6.5bn in 2027-28.

Behaviour and pass-through

• Low saving case assumes aid baseline has already fallen sharply.
• Central case assumes most programmes are cut but obligations remain.
• High saving case assumes few exemptions and rapid cancellation.
• Macroeconomic effects are mostly outside UK GDP.

Phasing

• 2026-27: -£3.0bn. Preparation or partial implementation.
• 2027-28: -£6.5bn. Main scenario year.
• 2028-29: -£7.0bn. Behaviour and pass-through develop.
• 2029-30: -£7.5bn. Steady-state uncertainty persists.

Main source groups

• Office for Budget Responsibility, "A brief guide to the public finances" (2026): The OBR expects public receipts of about £1,235bn in 2025-26; scale check for large packages.
• Reform UK, "Our Contract with You" (2024): The Contract claims large savings from departments, QE reserves, aid, welfare and net zero; defines scenarios but needs caution.
• FCDO, "Provisional UK aid spend 2025" (2026): Used to size the affected population, baseline economic quantities and sectoral exposure.
• Rajan and Subramanian, "Aid and Growth: What Does the Cross-Country Evidence Really Show?" (Review of Economics and Statistics, 2008): Cross-country evidence found little robust positive or negative link between aid and recipient-country growth; supports caution about claiming automatic development returns from aid spending.
• Clemens, Radelet, Bhavnani and Bazzi, "Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth" (Economic Journal, 2012): Re-analysis found that aid increases were followed by investment and growth when timing was handled differently; shows the evidence is mixed, not uniformly anti-aid.
• Reform UK, "Our Policies" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.