The Independent Commission for Aid Impact (ICAI) has warned that UK asylum costs could continue to absorb a significant portion of the nation’s reduced aid budget in 2027-28, leaving as little as 0.24% of gross national income (GNI) for overseas development. The report projects that one-fifth of the UK’s aid budget could be spent supporting refugees and asylum seekers, following the government’s decision to reduce the aid target from 0.5% to 0.3% of GNI in 2027 to accommodate higher defence spending. ICAI emphasizes that without better management, this trend could limit funding available for poverty reduction and humanitarian assistance abroad.
ICAI highlights that while the government has addressed some previous issues with aid budget management, including fluctuations in GNI affecting allocations, there is still a pressing need to focus on value for money as overall funding declines. The watchdog also stresses the importance of improved cross-government coordination to enhance strategic coherence and maximize the impact of reduced aid resources. An in-depth review detailing recommendations for optimizing aid management is scheduled for early 2026.
The report notes that in-donor refugee costs, which account for first-year support to refugees arriving in the UK, have grown rapidly from £628 million in 2020 to £4.3 billion in 2023, though preliminary 2024 figures suggest a reduction to £2.8 billion. ICAI warns that the UK currently spends significantly more per asylum seeker than other major European donors, largely due to reliance on expensive hotel accommodation, and calls for measures to reduce these costs while improving efficiency.
ICAI also identifies key areas for scrutiny as the UK transitions to the 0.3% GNI target. These include ensuring departments receive funding aligned with their capacity for effective development cooperation, meeting statutory requirements on poverty reduction and gender equality, and managing in-donor refugee costs to avoid undermining overall aid effectiveness. The report underscores that without reforms, the UK’s development programme risks diminished strategic impact, reduced value for money, and weakened international credibility.
A comprehensive review by ICAI in early 2026 will examine the government’s management of Official Development Assistance (ODA), with recommendations aimed at improving the allocation, planning, and delivery of aid. The review will also assess how the UK can maintain transparency, safeguard development objectives, and optimize outcomes amid the constraints of a shrinking aid budget and rising domestic refugee costs.
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