Rishi Sunak is considering freezing Britain’s foreign aid budget for an extra two years in a bid to balance Britain’s books.
The amount the UK spends on international development is set at 0.5 per cent of national income, but it had been expected that this would revert to its usual level of 0.7 per cent in 2024-25.
However, officials are considering extending this by another two years to 2026/27 – saving £4 billion a year.
On Friday, Mr Sunak warned that “difficult decisions” would have to be made on public spending and tax increases, but pledged they would be taken with “fairness at the heart”.
Across government, ministers are planning to stick to existing spending plans until the present spending review ends in 2024-25 – although savings will still have to be made in departments, because inflation is much higher than expected.
Treasury sources said however that after this date, there is scope for deeper cuts.
The Telegraph understands that one option being considered is that for three years from 2024-25 to 2027-28, spending could be pegged to inflation – rather than rising by more than inflation, as the Office for Budget Responsibility had originally forecast.
Such a move would save £20 billion a year, but that could mean severe cuts to public services.
Treasury officials also said capital spending is likely to fall after 2024-25.
Any decision to extend the aid freeze will be very controversial.
It is enshrined in law that aid spending should amount to 0.7 per cent of GDP. But during the Covid crisis, this was temporarily lowered to 0.5 per cent to reflect the hit to the economy and the huge cost of furlough and other schemes.
