Labour’s aid cuts are morally wrong. Here’s why they make...

Aid was soft power but also good for business: as countries get richer, they buy exports. Strategically, this is very short-sighted. Get right down to it and there are two reasons for thinking that cuts to Britain’s aid budget to pay for defence are a seriously bad idea. The first is that people will die as a result. There will be less money to respond to humanitarian crises and less money for vaccination programmes and hospitals. Realpolitik is being blamed for the decision, but realpolitik doesn’t make it right.

Image Credit: the Guardian [Larry Elliott]

But there are also economic arguments for rich countries providing financial support to less well-off nations, which were summed up succinctly in last year’s Labour party manifesto. This document could not have been clearer. International assistance, it said, helps make “the world a safer, more prosperous place”.

That remains as true as it was when Labour came to power last summer, and indeed it was still the party’s stated belief a month ago. When, as one of his first decisions, Donald Trump gutted the US aid budget, the foreign secretary, David Lammy, said it could be a “big strategic mistake”. Now that the UK has followed suit and reduced aid spending from 0.5% to 0.3% of national output, Lammy says it was a difficult but pragmatic decision. He was right before and is wrong now.

At its crudest, the economic case for overseas aid is that it is good for business. As countries become richer, they provide export opportunities for donor countries. The US has always understood this, with postwar Marshall aid for European reconstruction in part driven by fear of the spread of communism and in part as a means to provide markets for US goods. Under previous administrations, US humanitarian aid programmes have channelled agricultural surpluses into overseas food programmes.

In today’s world, it is no longer possible to think of aid spending and defence spending as discreet pots of money. Extreme poverty is increasingly concentrated in those parts of the world most seriously damaged by wars and the climate crisis. Five years ago, the global economy was about to be affected by the Covid-19 pandemic, a shock from which the UK has yet to recover. Ministers need to ask themselves a simple question: does cutting the aid budget make another worldwide health emergency more or less likely?.

Poor countries need help to boost economic development more than ever. They havebeen hard hit by the double whammy of Covid and the higher food prices triggered by Russia’s invasion of Ukraine three years ago. A new debt crisis is looming, and both the International Monetary Fund (IMF) and the World Bank have been warning that money that could and should be spent on schools, hospitals and building protection against the effects of the climate emergency is instead being spent paying back creditors.

The Labour governments headed by Tony Blair and Gordon Brown spearheaded previous debt relief efforts and were able to do so because Britain showed a strong commitment to overseas assistance. A new Department for International Development was set up, a goal was set of meeting the UN aid target of 0.7% of national income, and there was a clear gameplan. Spending more on aid was good for poor countries, but it was also good for rich countries such as Britain. It was a classic example of the exercise of soft power. Britain punched well above its weight when development issues were discussed at the IMF and World Bank.

The world is a lot more fragile and divided than it was in the early years of this century, when growth was strong and the era of financial crises and global pandemics was still in the future. With the US and China locked in a battle for economic supremacy, the battle is on to capture hearts and minds. Seen in this context, the UK’s decision to follow the US lead on aid spending is shortsighted. It will merely make poor countries more susceptible to offers of assistance from Beijing.

None of which is to say that every penny of aid is well spent. Yes, there is waste, as there is with defence spending. But in making the choice it has, the government has effectively bought into the rightwing argument that aid does more harm than good and traps poor people into a dependency culture. Labour needs to be careful. The right says the same about the welfare state, which will be next on its list of targets.

There is a case for higher defence spending. It is a more dangerous world and Britain can no longer rely on the US to provide guaranteed military support. But let’s be clear. The reason the aid budget is being cut to pay for the armed forces is not because it is the best way to raise money but because it is the easiest. The government is calculating that it will get far less grief from voters – especially Labour voters flirting with Reform UK – this way.

There are alternatives. Rachel Reeves could increase taxes on the wealthy. If the need is really as urgent as the government says, then the chancellor could justify borrowing more. A truly progressive government would be reviving the idea of a Robin Hood tax on speculative financial transactions to meet its manifesto pledge of raising aid spending back to 0.7% of national income.