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The UK will give advice to poorer countries instead of aid payments because of Sir Keir Starmer’s budget cuts.

Under Foreign Office plans, cash grants will be replaced with tips on tax collection and boosting economic growth as the UK moves “from donor to investor” in developing countries.

The Prime Minister announced in February that he would cut the aid budget to 0.3 per cent of gross national income (GNI) by 2027 to fund an uplift in defence spending.

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It means development spending will be at the lowest level since 1999, and will not return to its previous target of 0.7 per cent “until the fiscal situation allows”.

The cuts have been condemned by aid organisations, which described them as “shameful” and a “blow to Britain’s proud reputation as a global humanitarian and development leader”.

They mean that some expensive aid programmes will be replaced with advice offered at a lower cost, which officials believe will help other countries create economic growth.

UK to move away from ‘old dynamic’

In an article for The Telegraph, Baroness Chapman of Darlington, the development minister, said poorer countries “want the old dynamic of donor and recipient to give way to a partnership, based on investment”.

She said the UK was “increasing our efforts to share expertise with some countries, rather than giving direct funding,” and replacing cash payments with investments that will generate profit.

“We would prefer to send tax experts to growing economies in Africa and Asia to help their governments generate more income, rather than giving them money to support their social welfare systems,” she added.

Where the UK does spend money on a country, the aid will be used to encourage further private sector investment, and the Treasury now expects to see a return for the taxpayer in the long run.

“The financial position we inherited, and the changing security picture around the world, have forced us to accelerate changes already underway and long overdue,” Lady Chapman said.

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That will mean the Foreign Office must “genuinely prioritise the money we spend overseas” through “modern development focused on investment, expertise and partnerships”, she added.

Most countries will see a fall in direct aid from the UK and could see an uplift in other forms of assistance, including advice and investment, although direct aid spending on Ukraine, Sudan and Gaza will continue.

Trial scheme ‘boosted revenue’

The new approach will be set out in an essay by Lady Chapman for the Fabian Society next month.

It has already been trialled in Ghana, where aid spending fell from £47.1m in 2019 to £13.9m in 2023.

Last year, the UK sent experts to Ghana to help reform the country’s tax system, which has resulted in an extra £100m in revenue for public services.

Britain has also organised for scientists to help build a Ghanaian medical lab in Accra, which is now producing advanced medicines, including snake venom antiserum and an anti-rabies vaccine, which will generate revenue.

In India, the largest recipient of British aid since 1960, the UK is now investing in sectors that produce economic growth and generate profit, which has led to a negative aid spend.

“The UK needs to act in solidarity with the world’s poorest countries, listen to and amplify their voices so they can be heard globally,” Lady Chapman said.

“We need to rebuild the trust we have lost over decades, where too often the tone of Western countries was one of paternalism when it should have been partnership.”

She said the UK will cut some payments to less effective international organisations, and become an “activist shareholder” to campaign for reform in some bodies.

“We have to move beyond defining the value of our aid by how much we spend and instead focus on what we are trying to achieve, and what evidence we have that it will work,” she said.

“This is critical to maintaining the credibility of the development agenda and confidence in it, both from UK taxpayers and those countries we are proud to partner with around the world.”

We must move beyond defining the value of our aid by how much we spend

By Baroness Chapman of Darlington