Mon, 15 July 2024

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Penny Mordaunt set to cut UK aid budget by billions through private investment

2 min read

Penny Mordaunt is set to slash the UK's aid budget by billions by including private investors in overseas projects.

The International Development Secretary is set to announce the major shake-up to aid funding rules in a speech later today.

Under the new plans, pension funds and other for-profit groups will be given the chance to invest money in overseas projects.

Ms Mordaunt will have to convince the Organisation for Economic Cooperation and Development (OECD) to loosen rules around what kind of spending can be classified as aid to make the scheme possible but has not ruled out acting unilaterally to change the UK’s aid system if the body refuses to endorse her proposals.

According to the Sun, Ms Mordaunt’s plans have the backing of the Chancellor, Philip Hammond, who has been under increasing pressure to find the £13bn for the UK’s annual aid spend.

The move is also likely to be popular with a swathe of Conservative backbenchers who have become increasingly vocal on what they regard as a "wasteful" use of taxpayers cash on aid projects.

Conservative MP Jacob Rees-Mogg recently took aim at the spending, branding it "economically illiterate", adding: “You set 0.7 percent at the beginning of the year but the figure you are basing it on, you don’t know until the end of the year – by that time you are meant to have spent the money.”

“So it is a really wasteful approach to government spending.

He added: “You should set a budget at the beginning of the year on the facts known then and stick to it so you have the ability to take projects through properly. But then it has been wasteful.

A source close to Ms Mordaunt said: “How we do aid is changing. It’s now much more about projects that help a country’s economy, which means there is an opportunity for private money to make a return.

“Penny believes that means when investors step in, the taxpayer can step back, freeing up billions to spend elsewhere in government.”

But the government has committed to meet its target of spending 0.7% of GDP on aid and has vowed to complete all projects it has already committed too – meaning that any changes would not take effect for at least four years.

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