If aid budgets are used to help refugees at home, is it still foreign aid?

George Osborne recently announced that the UK government’s commitment to accept 20,000 Syrian refugees over the next five years would be partially funded through the UK’s foreign aid budget. At first sight the chancellor’s move is a very strange decision: how can money spent in the UK be counted towards the country’s contribution to humanitarian development?

Yet costs to support refugees in donor countries have been an internationally recognised component of aid budgets since new directives by the Organisation of Economic Cooperation and Development (OECD) were issued in 1988, and counting in this way is now very widespread among aid donors. It is also growing, both in absolute terms and as a proportion of total reported Overseas Development Assistance (ODA).

But this is bad for aid and it is also bad for social policy in the UK. In the context of widespread cuts to core services, such as housing support, it creates a special category of people who will continue to receive support under different rules. This is bound to fuel resentment against a group who are already widely resented.

Despite these obvious drawbacks, it might yet be good for global solutions to the ongoing refugee crisis – providing the rules governing these aid calculations can be reformed and harmonised.

For most of the period since 1988, successive UK governments have been firmly opposed to the idea of including refugee support costs in ODA. Over the last decade, however, the UK position on the inclusion of refugee support in aid budgets has gradually changed. In 2009, some costs to support asylum seekers crept into UK aid calculations for the first time, accounting for 0.1% of total ODA, and by 2013, this had increased to 0.8%, according to the OECD. This is still well below the OECD donor average of 4.3%, and far behind other countries, particularly the Nordics, as the graph below shows. Osborne’s announcement signals a substantial further increase for the UK.

What can be counted as aid

ODA is defined by the OECD as “government aid designed to promote the economic development and welfare of developing countries”. The rules governing what expenditure can be counted as ODA are set by the OECD’s Development Assistance Committee (DAC).

Discussions around the inclusion of costs incurred by supporting refugees who have arrived in a donor country began in the early 1980s and it became an agreed budget line in 1993. Since then there have been several attempts to harmonise how in-country refugee support is calculated, but there is still significant disagreement and tremendously wide variation between DAC members.

Between 2007 and 2013 (the last year for which information is available) the total amount of in-country refugee support reported as ODA by DAC members more than doubled, from just under US$2 billion to just under US$5 billion. As a proportion of total ODA spent by donors this marks a change from 1.9% in 2007, up to 4.3% in 2013.

The most recent discussions within the DAC committee about abolishing the budget line on in-country refugee support were in 2001. It recorded that:

The secretariat retains its long held view that donors' expenditures on refugees who arrive in their countries – while commendable from a humanitarian point of view – do not make a sufficiently direct contribution to the economic development and welfare of developing countries to qualify as official development assistance. Including such data undermines the credibility of the ODA concept.

One year only

At that time, in addition to the UK, the proposal to remove such aid from official ODA figures was supported by Belgium, Finland, Switzerland and the US but rejected by Australia, Austria, Canada, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway and Sweden. The OECD did not therefore change the reporting mechanisms.

Subsequent attempts to clarify the way the data is recorded have had no more success. There is general agreement that only support during the first 12 months a refugee arrives in a country can be counted as ODA and that this should include costs such as housing and income support, but not integration measures such as language training.

There is no agreement about when the 12 month period starts (for example, on registering an asylum claim or being recognised as a refugee) or how per capita costs should be calculated. Data from 2009 shows that costs recorded per refugee varied from US$1,803 in Portugal to US$32,596 in Belgium, with the UK near the bottom at US$3,261.

There is no reason why the DAC secretariat’s view in 2001 should have changed: including refugee costs, along with a number of other in-country costs, still undermines the credibility of ODA, though it has obviously become much more significant since then.

Yet there is reason to support the substantial reform of this budget line, rather than its elimination, which still seems politically impossible. A return to efforts to harmonise data collection methods for refugee support would allow a clear, comparable evaluation of the efforts each country was making. This information should be clearly separated from ODA. It should include positive measures to support refugees, including provision of language training, and it should extend beyond the first 12 months to recognise support that goes beyond that.

If a more organised approach is taken, pressure could then be brought on countries that were not contributing and collective efforts to help more refugees, such as through the European Union, could be managed more effectively. Attempts to respond to the refugee crisis in the EU demonstrate that lack of political will is one of the major barriers to a substantial response. Finding a clear way of evaluating and valuing each country’s contribution to refugee support, beyond simply the number of arrivals, may overcome that.

Michael Collyer receives funding from the Economic and Social Research Council for a project 'Optimising Refugee Resettlement in the UK' (ref ES/K006304/1).