By Stefan Dercon

Copyright independent

The Conservative Party’s announcement this week that it would cut £47bn from public spending over the next parliament – including a proposal to slash overseas development aid to just 0.1 per cent of Gross National Income (GNI) – marks a new low point for Britain’s global ambitions.

Presented as a measure of fiscal responsibility, such a move would instead deepen the UK’s retreat from the world. It would further weaken one of the few instruments Britain has left to project influence, build partnerships, and safeguard its long-term interests abroad.

Britain’s aid budget has already been cut to its lowest in decades – even as China and Russia pour resources into Africa, Asia, and beyond. Our retreat, alongside that of many other G7 countries, creates a dangerous vacuum. Development aid is not soft-hearted charity. When used well, it can support progress in poorer countries but also be a key strategic lever for Britain to support its quest for influence, build future trade partners, and help stabilise fragile regions before instability arrives on our doorstep. In a changing world, the challenge is not simply how much is spent, but also how it is spent.

Aid has always been political. During the Cold War, it was a tool of shallow diplomacy, even propping up regimes failing their populations. During the conflicts in the 2000s, aid underpinned stabilisation efforts to win “hearts and minds”. In recent times, programmes focusing on poverty reduction, health, and education were especially successful in fostering inclusion in growing, developing countries – taking advantage of global trade liberalisation, which was hugely beneficial to Western consumers.

A relatively stable global order allowed Britain’s aid programme to flourish under the apparent gloss of pure altruism, despite its political nature. That order is changing rapidly; the strategic relevance of aid is still there.

Retreating into isolationism and the vacuum it creates in poorer countries will backfire. In fragile states from the Sahel to the Horn of Africa, where Britain once had a respected voice, others are stepping in. China offers valuable infrastructure, buying goodwill, likely at a price. Russia sends ruthless mercenaries, cementing fear and disruption. If Britain and other like-minded countries retreat, the vacuum is quickly filled. In this world, aid is an important strategic lever as part of a broader global engagement.

So how do we get this right? Not simply by lamenting budget cuts, but by using aid budgets in ways fit for the times. There are three lessons we must apply to make aid a strong strategic investment for Britain:

First, aid works best when backed by a broader supportive economic environment for development. Britain cannot buy sustainable development outcomes in countries whose trade opportunities are blocked or whose debt burdens are unsustainable. Aid must be part of a wider diplomatic push for fairer trade rules, realistic debt relief, and investment partnerships that give the poorer developing countries genuine room to grow their economies. It needs pragmatic structures on the movement of technology, data, and even people, that don’t lock poorer countries out of emerging global orders. That means Britain working with others – not only our traditional allies in the G7 and the rest of Europe, but also emerging powers like India and even China – on shaping a global economy that works for all. If we leave that space empty, others will fill it to the detriment of many.

Second, aid must be anchored in Britain’s own interests while aligning with the interests of those who receive it. Voters are right to ask how money spent abroad benefits them at home. The answer lies in honesty and alignment. Aid to support stability in fragile regions that, left to fester, produce security threats and migration pressures. Aid to make countries more self-reliant to strengthen and fund their own health services, thereby underpinning global health systems that help stop the next pandemic before it reaches our shores. And aid to help create trading partners for Britain’s post-Brexit economy.

This only works if our interests and those of recipient countries genuinely align. If aid is transactionally used just to stop migrants or undercut rivals, it will fail. Worse, it will fuel resentment abroad and cynicism at home. The government needs to rebuild an honest coalition around aid and development policy among security officials, business leaders, and diplomats, as part of Britain’s foreign policy backbone – not as an optional extra.

Third, be more candid about what aid can and cannot do. Too often it is sold as a magic bullet – ending poverty, transforming economies. It can still be charitable and do good in many places. To remain relevant, aid must keep the ambition to support lasting change in countries’ economic paths and the quality of life of their citizens, especially for the poor and marginalised. But there are contexts where either that may not be possible or where aid interventions with short-term impacts risk creating problematic long-term dependencies. Not all deprivation in the world is a nail for which aid spending is the hammer.

To achieve this, aid must adapt in four key ways:

First, by being more selective, working especially where there is genuine political will for reform rather than spreading funds thinly. Second, by avoiding allocations solely on the basis of need, since this can entrench dependency and undermine incentives for local political action.

Third, by reducing the pressure for quick results that undermine local systems and institutions. And fourth, by empowering local reformers and coalitions, lowering the cost of real change instead of substituting for politics. This is not about returning to the heavy-handed conditionality of the past, but about taking a politically intelligent approach – one that aligns donor interests with the genuine ambitions of partner countries and their own growth and development champions.

Britain’s aid debate has for too long been a stale argument about whether we can “afford” to help the world’s poor. The real question is whether we can afford to relinquish our place in the world and abandon the political terrain that aid occupies. In a world of strategic competition, pandemics, and climate shocks, the answer is surely no.

Aid is not charity. It is strategy. And as I set out in detail in a new paper, “Rethinking Aid in a Contested World”, Britain must treat it that way – or we will suffer the consequences of this resource fading to irrelevance.

Dr Stefan Dercon served as chief economist in the Department for International Development (DFID) from 2011 to 2017, and as development policy adviser at the Foreign, Commonwealth & Development Office (FCDO) from 2020 to 2022. He is professor of economic policy at Oxford’s Blavatnik School of Government

This article was produced as part of The Independent’s Rethinking Global Aid project