The UK’s decision to increase defence spending and forsake foreign aid caught most officials and observers flat-footed. Few countries have articulated such a direct, one-to-one trade off before between these two areas of public spending. There are good reasons why.
The UK’s defence spending will now grow to 2.5% of GDP by 2027. This will be achieved by slashing the aid budget by GBP 6 billion per annum, reducing the UK’s Official Development Assistance (ODA) from 0.5% to 0.3% of GNI. UK’s Prime Minister Keir Stamer claimed responsibility for the decision, framing it as a necessary investment in collective European defence given the possible withdrawal of American security guarantees under Article 5 of the North Atlantic Treaty Organisation (NATO) Charter.
There are understandable pressures to grow defence expenditures. Since the annexation of Crimea by Russia in 2014, the 32 members of the NATO alliance have targeted 2% of GDP in defence spending, which the bulk of NATO countries meet or exceed. NATO member countries’ average defence spending has grown by 65% between 2018-2024 and there is every indication that heightened geopolitical tensions will grow defence expenditures even further.
Conversely, foreign aid is always vulnerable to cuts given the distant constituencies it services, even more so when geopolitical headwinds indicate there are significant, existential threats to national security that must be dealt with. Since 1970, 32 members of the OECD's Development Assistance Committee (DAC) have been expected to spend 0.7% of GNI as ODA. ODA spending has witnessed small year-on-year increases, reaching a notional peak of $223 billion in 2023 but cuts were coming fast and furious even before the US and UK’s recent announcements. Only five DAC countries met the 0.7% ODA target in 2023.
Notwithstanding these divergent trends, the explicit fiscal trade-off articulated by the UK between aid and defence has at least three pitfalls and perils.
1. A loss of agenda-setting power
Firstly, a state’s power is cultivated by a wider toolbox than just military spending. Foreign aid can be a platform from which national influence can be created, allies courted and agendas diffused. Rather than doubling down on defence by wounding foreign aid, the UK might have considered exploiting its sizable influence to unite traditional allies and emerging powers alike in a collective response to the collateral damage of America's abrupt global pullback and disengagement on both agendas. In a weaponised world, this could have included taking a leading role rethinking the entire aid endeavour to better service shared mutual interests. It may yet choose to cultivate such a diplomatic agenda, though this risks being a more challenging coalition to build given the UK's decision to cut its development budget.
2. Changing the nature of security threats
Secondly, sacrificing aid for defence may create a different set of security threats, ones that cannot be tackled by military personnel and hardware alone. Aid and defence have long worked in tandem to keep the UK safe. It has recognised as much for some time: the UK is only one of two countries over the last five years to have met both the aid and defence spending targets (achieved over three years from 2018 to 2020).
Growing the defence budget off the back of foreign aid risks changing the nature of a country’s vulnerabilities, while also coming with its own set of risks%20to%2053.8%20percent.). With the UK's decision, protection against cross-border threats like rising carbon emissions and pandemic prevention will become harder to fund, as will keeping alive critical global institutions and norms that enable cooperation and prevent conflict.
Unless, of course, the definition of "defence spending" is widened to cover a broader array of climate, health and human security concerns such that it enables spending on things that might otherwise 'count' as ODA. This would involve some amount of gaming defence spending accounting, the reverse of what the UK’s aid sector saw over the last decade as spending by other government departments grew substantially to fund in-donor refugee costs. We now expect NATO’s defence accounting systems to be carefully examined to see if foreign aid expenditures can now meet the threshold of defence spending. How far the definition of security spending can include developmental efforts in areas like human rights, economic empowerment or infrastructure without militarising foreign aid remains to be seen.
3. Setting a precedent that sinks cooperation
Finally, in this decision the UK risks nudging other countries to defund the global system of cooperation that is underpinned by ODA, tipping an imperfect but valuable rules-based international system closer to an ignominious collapse.
Up until now, few political leaders explicitly articulated a zero-sum choice between aid and defence spending. In fact, in 2017 the German CDU Party proposed in their manifesto a lockstep between aid and defence so these spending lines would grow or fall together in equal proportion. Though this lockstep was never implemented, Germany has been careful to avoid explicitly articulating a negative trade off between aid and defence, justifying its 2024 aid cuts on fiscal grounds alone, even as it ramped up defence spending.
NATO countries that spend more on defence show less inclination to invest in development. With the UK now explicitly pitting aid and defence against one another, the gates have been opened for other countries to follow suit. For example, in Canada, there is recognition that defence spending needs to be accelerated to meet the 2% NATO target. The centre-left Liberal Party will now find it significantly harder to protect Canadian foreign aid as it seeks to ramp up defence expenditures, something the Conservative opposition has been demanding. Where a more broad-based set of cuts might have once been politically feasible, the UK’s Labour government has legitimised left-leaning parties to dip into international aid coffers to subsidise defence.
The loss of a key ally like the United States is clearly a problem for both defence and development cooperation. But it would be wrong to think of defence as a necessity and aid as a luxury. Both have, and will continue to have, a key role in advancing national strategic interests.