Fin McCarron is the Senior International Programme Manager at the Conservative Environment Network
Keir Starmer is off. Any number of things could have been picked as the turning point. But, arguably, the final nail in the coffin was the resignation of John Healey as Defence Secretary. This was over the lack of investment into our armed forces, which fell well short of the 2035 NATO target of spending 3.5 per cent of GDP on defence. Even the new budget, now with an extra £4.7bn, will not bring us to 3.5 per cent of GDP.
Setting spending targets for key priorities as a percentage of GDP (or similar) is not a new idea. Notably the Overseas Development Assistance (ODA) target, essentially international aid, is currently enshrined in law at 0.7 per cent of Gross National Income (GNI) per year. But given the problems both defence and international aid targets have created, the next Prime Minister should think twice about determining spending levels like this.
Setting targets sets an inevitable political trap when circumstances force them to change it. It also reduces the conversation around spending to whether the target is being met, rather than whether the money has been spent well. Deciding how much money should be spent before you know what you want to spend it on is a recipe for poor policymaking.
This is not to say that the government shouldn’t spend more money on defence. The threats to our security are growing alarmingly. At the same time, the UK is lagging behind our international allies. The readiness of our armed forces leaves much to be desired. But the benefits of setting spending targets to encourage ambition in governments do not outweigh their structural costs.
The row about defence funding is just the most recent high profile example, but the long-term impact of tying spending targets to either GNI or GDP on our politics can be seen clearly with international aid.
When done well, international aid spending is important for the security of our nation. Climate adaptation funding can help keep food costs down by supporting farmers in countries we rely on for staple crops like rice, bananas, and coffee to become more resilient. Climate finance can also support people staying in their communities rather than being driven to migrate.
The UN has long advocated for every developed country to eventually spend 0.7 per cent of GNI on ODA. The UK passed this goal into law in 2015 and became the first country to reach this level of spending. But clearly, the political context has since changed considerably. Labour last year announced that this target would be downgraded to 0.3 per cent by 2027 to fund defence spending, reflecting that the world is in a much more dangerous place now than it was ten years ago.
When the aid budget cuts were announced last year, it prompted the resignation of Anneliese Dodds as the development minister. The backlash ate up valuable airtime and political space, and distracted from what the Government hoped would be a win on defence spending. This was inevitable. When you reduce the conversation around an entire sector down to one budget figure then the only metric for the relevant minister’s success becomes whether that budget figure is delivered.
This leads on to the next problem: the target has distracted us from scrutinising whether the money is actually having its intended impact. This is even worse for spending targets tied to measures like GNI, because we only know the precise amount we have to spend towards the end of the year. So we don’t fund new projects but retreat to what we know.
We therefore give extra money to organisations like the World Bank, where we have a seat on the board, but our influence over where money gets spent is limited. If the UK can’t spend the money ourselves, we can’t use it to further our own interests - for example by supporting farmers at risk of climate change to keep UK food costs down or striking deals with countries to return migrants.
If there were no budget target then the international development sector would have to focus more on the outcomes of aid spending, on whether any of this money was actually doing good and focused on British interests. We may well have greater scrutiny on the fact that nearly one fifth of our ODA is spent on asylum hotels and HMOs, not overseas, not supporting development and not providing much assistance.
The best way to adapt to changing circumstances and dealing with the world as it is will always be to provide the most flexibility and to focus spending decisions on real metrics for success. If we are clearer about what success means we can also ensure that money is used in the most efficient and effective way.
Percentage spending targets do not work. Andy Burnham will have to think seriously about whether he is bold enough to actually spend taxpayers’ money according to our country’s interests rather than those of Treasury spreadsheets.