3. The United Kingdom’s financing for development

The United Kingdom is unique in having legislation ensuring 0.7% of its GNI is spent as ODA. In 2013, it became the first G7 country to reach this UN target and in 2015 its parliament enshrined the target in law. Under intense public scrutiny, and with cross-party support over the review period, the United Kingdom is one of only five DAC members that consistently delivers against the target (Figure 3.1). In 2018, the United Kingdom provided 0.23% of GNI as ODA to LDCs, making it one of the six DAC members to have surpassed the Istanbul target of 0.2% of GNI to LDCs.

Finally, the United Kingdom is the third-largest donor country in volume, having disbursed USD 19.4 billion in total ODA in 2018, an increase of 1.8% on 2017 levels. This significant financial contribution to international development is to be commended.

Ensuring that ODA reaches 0.7% of GNI has required planning and has helped the United Kingdom to identify all activities across government that can be reported as ODA. It has also led the United Kingdom to advocate within the DAC for broader eligibility criteria for ODA activities. Some proposed changes were adopted by consensus but some DAC members and external stakeholders contend that broadening criteria strains the credibility of ODA. The political choice to achieve exactly 0.7% ODA/GNI every year, combined with a calendar year for ODA reporting that is not aligned with the United Kingdom (UK) budget year, has put pressure on the DFID as a spender of last resort. Such pressure affects the predictability of DFID’s support, with uplifts in humanitarian spending and contributions to global funds absorbing underspends towards the end of the year. The United Kingdom could learn from the experience of other DAC members, such as Denmark and Sweden, who have respectively committed to spending 0.7% and 1.0% of GNI as ODA, but use multi-year averages or national GNI estimates to report on progress against commitments.

The quality of ODA reporting varies across departments, with DFID leading on transparency. With no single department responsible for the quality of overall reporting, the United Kingdom’s reporting to the OECD Credit Reporting System has been rated as “fair” because of late data submission as well as poor quality of data (OECD, 2019[2]). Predictability is good for individual grants (Chapter 5), but there is limited reporting on forward spending for the overall portfolio (OECD/UNDP, 2019[3]). The quality of reporting is improving in other spending departments, helped by technical support from DFID. To be cost-effective and maintain high quality reporting, this support may need to become a long-term offer from DFID, as reporting standards are not static and staff turnover will necessitate constant re-training.

With 100% of its portfolio disbursed as grants, the United Kingdom complies with the DAC recommendations on the terms and conditions on aid. In terms of the DAC recommendation on untied aid, the United Kingdom’s ODA is reported as 100% untied but 82% of contracts were awarded to companies based in the United Kingdom (for a total of USD 2.3 billion in 2016) (OECD, 2018[4]). Continued efforts to diversify suppliers1, would support inclusive prosperity and help build local capacities, recognising that this may require restricting some tenders and reporting such procurement as partially tied (Chapter 4).

The 2015 Aid Strategy as well as spending targets in Single Departmental Plans broadly define the United Kingdom’s bilateral priorities (Chapter 2) and each department is responsible for setting its geographic and thematic priorities within the parameters of the Aid Strategy (Chapter 4). In particular, DFID’s Single Departmental Plans include spending targets that respond to policy commitments. Frequent changes of leadership have led to new pledges and commitments being included in what have become yearly plans without any targets being abolished. This has resulted in an accumulation of priorities and commitments. The risks inherent in this approach have been raised in all DAC peer reviews since 2006 and, while much diminished over the years, spending targets continue to affect the United Kingdom’s ability to respond to country contexts. DFID has already taken steps to mitigate these risks, including by designing Centrally Managed Programmes to respond to certain spending targets. The current review of all current pledges and commitments is a positive step towards rationalisation.

In line with the Aid Strategy, DFID has consistently allocated at least 50% of its bilateral budget to fragile contexts over recent years,2 though gross bilateral ODA to fragile states fell by 11% between 2017 and 20183 (Chapter 7). In line with its overall focus on poverty reduction, the United Kingdom provided 25.8% of gross bilateral ODA to LDCs in 2018. The share of ODA going to middle-income countries has remained stable over the last five years, with 32% of gross bilateral ODA being disbursed in lower middle-income countries and 12% in upper middle-income countries in 2018 (Annex B).

However, the United Kingdom’s top recipient countries have been receiving an ever lower share of bilateral aid in recent years: in 2013-14, the top 20 recipients received 47% of bilateral ODA; in 2017-18, they only received 40%, below the DAC average of 42% (Annex B – Table 4). Given the United Kingdom’s size and expertise, its ability to support and influence reform in partner countries is not yet at risk, but this is something to carefully monitor. In 2017-18, 44.7% of the UK bilateral ODA was country programmable aid, compared to a DAC country average of 48%.

In 2018, the United Kingdom channelled 35% of gross bilateral ODA though the public sector, a continued increase since 2016 (27.5%). Multilateral organisations were the second main channel of delivery (30%).

The United Kingdom focuses much of its bilateral ODA on social infrastructure and services, and committed USD 3.2 billion of bilateral aid to this sector in 2017-18 (45% of bilateral ODA).4 Within social infrastructure and services, health as well as governance and civil society are top priorities, with funding commitments in these areas increasing since 2015:

  • Health commitments rose from 9% of bilateral ODA in 2015-16 to 19% in 2017-18 (Annex B, Table B.5),5 with most of the increase managed by the Department of Health and Social Care under the Fleming Fund6 and the National Institute for Health Research Global Health Research programme.7 In response to criticism that funding was mainly benefitting research institutions based in the United Kingdom, direct funding to local researchers has increased.

  • Funding commitments to governance increased from 12% to 16%. Most of the increase in the governance sector was targeted at conflict, peace, and security and was channelled through the Foreign and Commonwealth Office (FCO), reflecting the priorities of the National Security Strategy and the Aid Strategy.

Humanitarian aid was the third largest sector of bilateral funding in 2018, comprising 9.8% of bilateral aid committed over 2017-18 (14% of bilateral ODA disbursements in 2018). This nonetheless represents a sharp decrease in 2018, following three years of rapid growth (Chapter 7).

In line with the United Kingdom’s prosperity agenda, the share of aid allocated to productive sectors has also increased, more than doubling to 11% in 2017-18 compared to 5% in 2015-16.

The United Kingdom’s commitment to gender equality is reflected in its ODA allocations and across the portfolio. In 2017-18, the United Kingdom committed 45% of its bilateral allocable aid to programmes supporting gender equality and women’s rights, up from 37% in 2015-16 but below the level (48%) reported in the last peer review (OECD, 2014[5]). Programmes supporting gender equality and women’s rights cover all sectors of the portfolio, with a particular focus on population and reproductive health, water and sanitation, education as well as economic infrastructure and services. However, the vast majority of these projects had gender equality as a significant objective, while only 2% of bilateral allocable aid targeted gender as a principal objective in 2017-18.8

Steady increases in ODA allocations for the environment and the fight against climate change since 2015 are helping the United Kingdom to slowly catch up with the DAC average. There is, however, still work to be done if the United Kingdom is to lead on climate action and align all its ODA with the Paris Agreement. Indeed, in 2017-18, USD 1.8 billion of bilateral aid commitments addressed environmental sustainability and USD 1.7 billion addressed climate change mitigation or adaptation. This represents 27% and 25% of bilateral allocable aid respectively (Annex B, Table 5), compared to a DAC average of 33% and 25%. The climate change portfolio is evolving, with more commitments to mitigation programmes. Programmes that include climate change mitigation and adaptation are mainly focused on economic infrastructure and services, production and water and sanitation (OECD, 2018[6]).

In 2017-18, the United Kingdom (UK) provided an average of USD 10.2 billion to multilateral organisations through a combination of core funding (40% of total ODA) and earmarked funding (20% of total ODA).9 Economic development is the main focus of multilateral allocations, driven by core contributions to the World Bank (which received 36% of total UK ODA to multilateral agencies in 2018)10 and Regional Development Banks. Contributions to the health sector rank second, in line with the United Kingdom’s efforts to promote global health. For instance, the United Kingdom is the largest donor to Gavi, the Vaccine Alliance and the third-largest donor to the Global Fund to Fight AIDS, Tuberculosis and Malaria.

Allocations to the multilateral system and decisions on the balance of core and earmarked funding are based on performance: roughly 90% of core funding from DFID (which manages 84% of the United Kingdom’s multilateral contributions) currently goes to organisations that were ranked as top performers in the 2016 Multilateral Development Review (DFID, 2016[7]). The review assessed the organisational performance of the United Kingdom’s multilateral partners and their alignment with UK objectives.

There is a slight disconnect between the United Kingdom’s commitment at a central level to UN development system reform (Chapter 2) and the composition of its funding. In particular, 86% of the United Kingdom’s disbursements to UN funds and programmes were earmarked in 2017-18 (Figure 3.2). Having committed to the collective target of 30% core funding set out in the UN Funding Compact (United Nations, 2019[8]), the United Kingdom could consider reviewing the balance between its core and earmarked funding. A proportion of core funding to UN agencies is linked to progress on a sub-set of UN reform targets, which partners fear could distort the overall reform agenda (Chapter 5). The majority of earmarked funding is considered good quality by the UN Development System (United Nations MPTF Office and Dag Hammarskjöld Foundation, 2019[9]), with less than a quarter (22%) of earmarked funding supporting project type interventions (Annex B).

Exiting the EU will have a direct impact on the composition of the United Kingdom’s ODA. Contributions to and through the EU represented 9% of the United Kingdom’s gross disbursement and 26% of ODA flows to multilateral agencies in 2018. It is estimated that due to rolling commitments, the United Kingdom will still spend between USD 4 and USD 5 billion through the EU over the next five years (SEEK Development, 2020[10]) compared to USD 9 billion over the last five years. Depending on the terms of the exit agreed with the EU, the United Kingdom may still be able to contribute to EU funds and facilities that match its key priorities.11 At present, it is unclear how the funding released from EU contributions will be reallocated and effectively used.

The United Kingdom is a leader in supporting developing countries to raise domestic revenues and disbursed USD 35.7 million12 in ODA to support domestic revenue mobilisation in 2017-18. Domestically, the United Kingdom has established a capacity building unit within Her Majesty’s Revenue and Customs which supports developing countries by seconding long-term resident advisers (e.g. in Pakistan, Ethiopia and Ghana) as well as deploying short-term experts. Support for regional and multilateral actors working in tax and development includes: secondments of experts to the African Tax Administration Forum; sharing of experts within the Tax Inspector Without Borders Initiative; and funding to the OECD, World Bank, International Monetary Fund (IMF) and the Platform for Collaboration on Tax. The United Kingdom uses its influence and engagement to bring on board other partners through the Addis Tax Initiative. In response to an Independent Commission for Aid Impact (ICAI) follow-up review which concluded that DFID’s “beyond aid” initiatives on tax could be more systematic,13 DFID has expressed a willingness to pursue its leading role but does not see the need to formally plan its influence strategy (ICAI, 2017[11]).

The United Kingdom is working to reduce the cost of sending remittances home by strengthening the regulatory environment, encouraging the modernisation of payment infrastructure and improving transparency of costs and market competitors. The average cost of sending remittances from the United Kingdom fell slightly from 7.49% of the total amount in 2015 to 6.97% in 2019 (HM Government, 2019[12]), compared to a global average of 6.82% (World Bank, 2019[13]).

The United Kingdom is the sixth largest contributor to Aid for Trade in the DAC. In 2017, it committed USD 1.1 billion (17.1% of bilateral allocable aid) to improve developing countries’ trade performance and integration into the world economy. The United Kingdom uses its position in the Group of Seven (G7), Group of Twenty (G20), International Monetary Fund (IMF) and the Paris Club to advocate for debt sustainability and transparency.

In addition to supporting private sector development in developing countries through its prosperity agenda, the United Kingdom advocates for private sector investment in those countries. For instance, the 2019 London Initiative that followed on from the Jordan Compact actively promotes private sector investment in Jordan to unlock growth and job creation (DFID; DIT, 2019[14]). During the first Africa Investors Summit in 2020, the United Kingdom announced GBP 1.5 billion (USD 1.9 billion) worth of initiatives to boost trade and investment, create jobs and mobilise private investments with no specified timeframe, a quarter of which will come from the ODA budget.

DFID has innovative funding instruments to leverage public and private resources for sustainable development. These instruments, designed based on a robust analysis of their respective costs and benefits, include guarantees; disaster assurance; seed funding to multilateral trust funds coming from the ODA budget; and CDC Group. In an effort to leverage private finance, the United Kingdom is working with the City of London and the London Stock Exchange Group to strengthen financial markets in developing countries and to create a global market for impact investment – with the United Kingdom currently being one of the major hubs for impact investments.14 The “Investing in a Better World” project is an example of the United Kingdom’s efforts to better understand what barriers citizens in the United Kingdom public face when investing their personal savings in companies, funds and projects that contribute to the Sustainable Development Goals (SDGs) and have a positive impact on development (HM Government, 2019[16]).

There is nonetheless scope to: 1) better communicate the United Kingdom’s full offer to the private sector; 2) formally build a continuum of support, ranging from early technical assistance to investment at scale; and 3) make sure all relevant instruments can be used across the range of countries in which the United Kingdom wishes to support prosperity, trade and economic growth.

While the requirement to spend 0.7% of GNI as ODA incentivised the United Kingdom to identify, track and report all activities that can be reported as ODA, it is less effective at reporting other spending beyond concessional aid, which is covered by its transparency commitments. On the one hand, the United Kingdom has been participating in the task force designing the new Total Official Support for Sustainable Development metric, which is intended to capture a broader range of development finance. On the other hand, the United Kingdom does not currently report other official flows – such as export finance, non-concessional loans or private sector guarantees. More complete reporting to the OECD by the United Kingdom would be consistent with its commitment to transparency.


[7] DFID (2016), Raising the Standard: the Multilateral Development Review, Department for International Development, http://data.parliament.uk/DepositedPapers/Files/DEP2016-0883/Raising_the_Standard_the_Multilateral_Development_Review_2016.pdf.

[14] DFID; DIT (2019), Jordan: Growth and Opportunity - The London Initiative 2019 – Co-Chairs Statement, https://www.gov.uk/government/publications/jordan-growth-and-opportunity-the-london-initiative-2019-co-chairs-statement.

[16] HM Government (2019), Investing in a Better World: Understanding the UK Public’s Demand for Opportunities to Invest in the Sustainable Development Goals, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/834207/Investing-in-a-better-wold-full-report.pdf.

[12] HM Government (2019), Voluntary National Review of progress towards the Sustainable Development Goals, Crown Publishing, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/818212/UKVNR-web-accessible1.pdf.

[15] ICAI (2019), CDC’s Investments in Low-Income and Fragile States, Independent Commission for Aid Impact, https://icai.independent.gov.uk/report/cdc/ (accessed on 28 January 2020).

[11] ICAI (2017), ICAI Follow-up of: UK Aid’s Contribution to Tackling Tax Avoidance and Evasion a summary of ICAI’s full follow-up review, International Commission for Aid Impact, https://icai.independent.gov.uk/report/tax/ (accessed on 28 January 2020).

[1] OECD (2020), International Development Statistics (online database), http://www.oecd.org/dac/stats/idsonline.htm (accessed on 5 February 2020).

[2] OECD (2019), DAC Working Party on Development Finance Statistics, DAC Statistical Reporting Issues in 2018 on flows in 2017, Unpublished.

[4] OECD (2018), 2018 Report on the DAC Untying Recommendation, OECD Publishing, Paris, https://www.oecd.org/dac/financing-sustainable-development/development-finance-standards/DCD-DAC(2018)12-REV2.en.pdf.

[6] OECD (2018), Development Co-operation Report 2018: Joining Forces to Leave No One Behind, OECD Publishing, Paris, https://dx.doi.org/10.1787/dcr-2018-en.

[5] OECD (2014), OECD Development Co-operation Peer Reviews: United Kingdom 2014, OECD Development Co-operation Peer Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264226579-en.

[3] OECD/UNDP (2019), Making Development Co-operation More Effective: 2019 Progress Report, OECD Publishing, Paris, https://dx.doi.org/10.1787/26f2638f-en.

[10] SEEK Development (2020), Donor Tracker - United Kingdom Donor Profile, https://donortracker.org/country/united-kingdom (accessed on 27 January 2020).

[8] United Nations (2019), UN Funding Compact, United Nations, https://www.un.org/ecosoc/sites/www.un.org.ecosoc/files/files/en/qcpr/SGR2019-Add%201%20-%20Funding%20Compact%20-%2018%20April%202019.pdf.

[9] United Nations MPTF Office and Dag Hammarskjöld Foundation (2019), Financing the UN Development System - Time for Hard Choices, https://www.undp.org/content/undp/en/home/librarypage/time-for-hard-choices.html (accessed on 5 March 2020).

[13] World Bank (2019), Remittance Prices Worldwide, https://remittanceprices.worldbank.org/sites/default/files/rpw_report_december_2019.pdf.


← 1. A Supplier Review in 2017 led to significant reforms including: a Strategic Relationship Management programme to improve collaboration with partners and unlock learning, creativity and innovation across portfolios; measures to open DFID’s markets to new supply partners, small businesses and developing country supply partners; and introducing terms and conditions preventing “exclusivity” agreements. A DFID Supplier Portal was launched in July 2019 to increase timely awareness of upcoming opportunities with DFID, whether in the United Kingdom or in-country. DFID’s Procurement and Commercial Division is working to diversify the supply chain by taking the lead across the UK government on an improved approach to contracting small and medium enterprises in partner countries. See also Chapter 4.

← 2. DFID’s list of fragile states differs from the OECD fragile state grouping. It takes into consideration countries that are not considered fragile in the OECD framework, but that are affected by a crisis, or neighbouring a “high-fragility” state, such as Jordan and Lebanon. For more, see the fragile state indicator description in the DFID methodology note for fragile and conflict-affected states at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/722389/Methodology-Note-Fragile-and-conflict-affected-states-and-regions.pdf.No source specified.

← 3. For comparison purposes across the DAC, assessment of engagement in fragile states in DAC peer reviews is based on the OECD Fragility Framework at http://www3.compareyourcountry.org/states-of-fragility/overview/0. Up to 2019, DFID used its own definition and list of fragile contexts to measure its allocations to fragile contexts. See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/815510/Methodology-note-Fragile-and-conflict-affected-states-and-regions.pdf.

← 4. Over 2017-18, the United Kingdom disbursed USD 4.7 billion in 2017 constant prices, representing 40% of bilateral ODA.

← 5. Disbursements in the health sector rose from 8.3% in 2015-16 to 10.7% in 2017-18.

← 6. The Fleming Fund aims to support low and middle-income countries to tackle antimicrobial resistance by improving surveillance and generating relevant data that are shared nationally and globally.

← 7. The research funded through the National Institute for Health Research’s Global Health Research programme aims to develop and commission new global health research though partnerships; deliver primary benefit to the health and economies of the poorest people living in countries on the DAC list; support their progress towards achieving the SDGs, and strengthen UK and LMIC research capabilities and expertise.

← 8. Significant objective means that gender equality is an important and deliberate objective, but not the principal reason for undertaking the project/programme, often explained as gender equality being mainstreamed in the project/programme.

← 9. DAC peer reviews use the OECD definitions for core and earmarked funding which apply to data reported to the Creditor Reporting system. UN organisations have their own methodology for assessing earmarking – see for example the notes section of the UN Development System 2018 Financing Report. See www.daghammarskjold.se/wp-content/uploads/2019/08/financial-instr-report-2019-interactive-1.pdf.

← 10. The United Kingdom is also the largest donor to the International Development Association, as confirmed by its recent pledge of GBP 3.34 million (USD 4.45 billion).

← 11. Examples include humanitarian relief, security and migration.

← 12. In 2017 constant prices.

← 13. A more systematic approach might include, for example, clear strategies and objectives, adequate staffing and systems for monitoring and reporting on its results.

← 14. Sweden has developed similar hubs: 1) the Swedish Leadership for Sustainable Development, gathering 20-25 of Sweden’s biggest companies to work towards more sustainable business through information sharing, normative dialogue and concrete projects and 2) Swedish Investors for Sustainable Development, which aims to coordinate, stimulate and engage investors in the implementation of the 2030 Agenda and the Addis Ababa Agenda for Action (this network has been replicated by the UN on a global level).

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