Rycroft: Government has no choice but to allocate domestic refugee costs as ODA spend

Home Office perm sec says government is abiding by international aid spending rules amid watchdog criticism
Matthew Rycroft at the PAC session. Photo: Parliamentlive.tv

By Tevye Markson

17 Apr 2024

Home Office permanent secretary Matthew Rycroft has said the government has “no choice” over which domestic refugee costs are paid for by official development assistance.

His comments come after the UK’s aid watchdog and MPs raised concerns that the Home Office’s aid spending is “wreaking havoc” on the FCDO's development work.

The Independent Commission for Aid Impact has called for the UK to consider introducing a cap on the proportion of the aid budget that can be spent on domestic refugee costs and to adopt a more conservative approach to how it reports these costs. The International Development Committee has gone further and said the government should ringfence the UK’s aid budget for overseas spending.

Appearing before the Public Accounts Committee, Rycroft was asked by Conservative MP Sir Geoffrey Clifton-Brown  if the UK government spending £4.3bn and 28% of its aid budget on supporting refugees and asylum seekers in the UK was “sustainable”.

Rycroft said: “It's absolutely not sustainable and that's why the government is taking such size novel and decisive and robust action to stop the boats and more broadly to deter illegal migration. It is a statutory obligation on the government…for the government to provide support, including accommodation for asylum seekers who would otherwise be destitute. And the rules of ODA mean that the first year of those costs in any donor country count as ODA. So it's not a choice of the British government to score that money as ODA is just part of the rules of what counts as ODA.”

Clifton-Brown followed up, saying: “It may well be part of the rules and it may well qualify for ODA spending, and, of course, part of the answer is to try and reduce that cost which has gone up from 16% since 2022, but it is a quarter of all our aid spending. So it is a very big part of that spending. Just because it’s liable under the rules, is that a correct way of allocating these costs? Should it not come under the Home Office budget?”

Rycroft reiterated that there is “no choice”.

“It has to count as ODA because the rules describe what sorts of activity counts as ODA and then a donor like the UK abides by those rules and sets out annually all of its spending that meets those rules. And this spending, for the first year of asylum seekers, does meet those rules. And that is why there is no choice about it.”

He added: “There is, of course, also a very significant amount of activity to reduce those costs that is much too high. That is why we are seeking to reduce our reliance on hotels, which is a very large proportion of those costs…not least, so that the ODA part of taxpayers money can be spent elsewhere.”

Clifton-Brown responded that the committee "shall be examining where a lot of that money is spent” and moved on to another topic.

The ICAI’s 2023 report on the UK government’s use of ODA for domestic refugee spending says “the UK’s method for calculating in-donor refugee costs seems to be within the rules but does not follow the OECD-DAC guidelines on a conservative approach”.

The OECD Development Assistance Committee guidelines state that “there is a need to adopt a conservative approach and to exercise caution when reporting against this category, to avoid overestimates and to protect limited resources available for ODA and the integrity of the ODA concept”.

The ICAI says other countries who follow the guidelines have taken such an approach to reporting. It said:

  • Belgium does not include support costs for asylum seekers whose application for refugee status ultimately fails and only includes marginal costs such as textbooks and school supplies when counting ODA-eligible education costs.
  • Iceland does not include costs for asylum seekers arriving from safe countries in cases where close to 100% of applicants from that country are rejected
  • France does not include education for refugee and asylum-seeking children in its in-donor refugee costs
  • Australia and Luxembourg do not count any refugee or asylum support costs as ODA at all

The ICAI has also argued that the UK’s “extensive” use of modelling and unit pricing to calculate domestic refugee costs increases the risk of higher levels of reporting.

The watchdog picked out Homes for Ukraine – a scheme which includes ODA-eligible and non-ODA-eligible spending– as an example. It said if the UK tracked expenditure at the level of individual refugees, it would be able to work out how much of the actual local council expenditure is ODA-eligible. But due to the use of modelling based on unit costs, and assumptions of how local authorities will spend the funding, “we cannot confirm that DLUHC can ensure that no more than 69% of the funds are spent on ODA-eligible activities, or that the 12-month rule for spending of in-donor refugee costs is always followed”, the ICAI said.

The DAC asks donors to “report actual expenditure as far as possible” and offers support to help states achieve this. The ICAI’s report says Austria, Italy and Sweden report only actual, measurable costs and keep data bases to track ODA expenditure at the level of individual refugees and asylum seekers.

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