There is “no money and no plan” guiding the UK’s foreign aid policy under Labour, MPs have warned.

In a scathing report on the future of aid spending, the International Development Committee said on Tuesday that Britain’s new strategy is characterised by “significant gaps”, including a “lack of clarity” about how to achieve stated goals.

The official overseas development assistance budget was reduced from 0.5 to 0.3 per cent of gross national income – a real-term reduction of 40 per cent – in February 2025, as funds were redirected towards defence.

In response, the Foreign, Commonwealth and Development Office (FCDO) last month announced a new strategy to “reset” spending with a more “modern” approach to aid.

But Andrew Mitchell, who served as the International Development minister under David Cameron and later became deputy foreign secretary, said the cross-party report highlights the gaping holes in the FCDO’s strategy.

“Sadly [this] confirms the deep concern of many about the endless culling of the development budget – there is no money and no plan either,” he told The Telegraph.

The FCDO’s strategy unveiled “four essential shifts” in the UK’s aid partnership: from donor to investor, from international intervention to local partnerships, from providing grants to exchanging expertise, and from service delivery to capacity building.

But Sarah Champion, the chair of the International Development Committee, said the FCDO still needs to “explain what success will look like and how our external partners will be involved”.

“Currently, we only have the skeleton of the Government’s new approach to development spending,” she said. “Ministers still need to put flesh on the bones.”

She added: “The reality is, when done well, development spend doesn’t just directly help the poorest in the world. It also helps to prevent conflict, keeps people secure and prosperous in their homes, prevents migration and enhances our global reputation.”

The report criticised the continued use of the foreign aid budget to fund refugees living in Britain, calling it the “antithesis [of a] proactive and strategic approach to aid”. It also warned there has been very little clarity from the government on what it means by a shift from “international intervention to local leadership”.

Other gaps include where money should be spent. While the government said last month that Britain would no longer provide aid to G20 nations, it has since launched investment partnerships in several G20 countries, including South Africa and Indonesia.

There are also concerns about the FCDO’s shift from a “donor to investor”. The government says it will help developing nations in Africa and Asia to grow sustainably, while also supporting fragile and conflicted affected regions such as Sudan, Yemen, Syria and Gaza.

But the committee raised concerns about an over-reliance on the British International Investment (BII), the UK’s aid-funded development finance institution.

The organisation invests in lower income countries to stimulate their economies with a focus on jobs and livelihoods, but critics say it has a weak focus on poverty reduction, a lack of oversight, and funds projects without clear outcomes – including luxury hotels.

The government has not provided a “strong enough case” for its prominence in the aid strategy, the International Development Committee warned, adding that the BII’s approach may be contradictory to the FCDO’s stated goals.

“There has been a lack of clarity over how BII’s investment strategies align with development priorities… [and] the committee has seen variable evidence of coordination between BII and FCDO missions in-country in terms of investment decisions,” it said.

It also cited analysis from the Bond Partnership, a network of over 300 British charities, which found only 17 per cent of BII’s 2024 investment portfolio reached the world’s least developed countries, and just 12.6 per cent was directed towards the most fragile states, where acute poverty is highest.

Last week Leslie Maasdorp, the South Africa born Chief Executive of BII, told the Telegraph that Britain will invest up to £8bn in the initiative, and insisted that the organisation “is committed to demonstrating that a new, mutually-beneficial path exists” in aid spending.

“Our model is embedded in the belief that the private sector is the engine of economic growth,” he said. “The state has an important and vital role to play in creating enabling conditions for investment… but ultimately it is the private sector and entrepreneurs that make an economy tick.”

An FCDO spokesperson said the government welcomes the report, and will respond to the recommendations in due course. 

“Our commitment to international development remains a central part of our foreign policy,” they added. 

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