Estimates Day debate: Spending of the Foreign, Commonwealth and Development Office

The debate topic was proposed by Sarah Champion MP and Dame Emily Thornberry MP, the respective chairs of the Commons International Development and Foreign Affairs Committees.

Approval of Estimates

One of Parliament’s longest standing functions is the consideration and authorisation of the government’s spending plans, requiring the government to obtain parliamentary consent before spending public money. Estimates, sometimes known as Supply Estimates, are the documents presented to Parliament setting out the government’s plans for spending for a given year. The process of obtaining Parliamentary approval to those plans is known as Supply. With a few specific exceptions, the government is required to obtain authority from Parliament through the supply process before it can spend public money.

Following the debate, the House will vote on whether to approve the Supplementary Estimate for the FCDO for 2025/26.

For more information about the 2025/26 Supplementary Estimates, see the Library briefing: Revised Government spending plans for 2025/26

For an interactive dashboard exploring departmental breakdowns, see the Library dashboard Supplementary Estimates data: Government spending plans for 2025/26

Spending on Official Development Assistance (ODA)

In February 2025, the UK Government announced that UK aid spending will be “gradually reduced” from 0.5% of gross national income (GNI) to 0.3% of GNI in 2027. Relevant data and policy implications are covered by the Library’s research briefing UK aid: Reducing spending to 0.3% of GNI by 2027/28, last updated in February 2026. Relevant sections include the below:

• Section 2.1 sets out how total spending will decline from 2025.
• Section 2.2 provides information on changes to multilateral spending, which the government has said it will prioritise. The government has made announcements on funding to organisations such as the World Bank, Gavi, the vaccine alliance, and Global Fund to fight AIDS, TB and Malaria.
• Section 2.3 sets out the priority areas for bilateral aid spending and planned FCDO spending in the 2025/26 financial year. Both Africa and the Middle East and North Africa will receive less FCDO bilateral aid.
• Section 2.4 describes other government plans and announcements, relating to:
  • The Integrated Security Fund
  • International Climate Finance
  • Gender equality
  • British Council
  • BBC World Service
  • FCDO staffing

The remainder of section 2 of the briefing provides details on the FCDO’s equality impact assessments for 2025/26 and alternatives the government is pursuing, such as a shift from “donor to investor”. Assessments and spending plans from 2025/26 are expected to be published in the coming months.

Information on the UK’s development finance institution, British International Investment, can be found on the Library briefing on the body. The BII invests in business and companies overseas with the aim of generating jobs and reducing poverty.

The UK’s “soft power”: BBC World Service and British Council

“Soft power” refers (PDF) to obtaining desired outcomes through attraction, persuasion and other co-operative means rather than coercion or payment. It can take a range of forms, from culture and media to tourism and education, diaspora engagement, to UK participation in international associations including the Commonwealth.

In January 2025, the government launched an advisory “soft power” council. Then Foreign Secretary David Lammy said it would bring together cultural, sport and geopolitical experts and industries to deepen the UK’s global alliances and influence.

The government’s spending on the British Council and on the BBC World Service is covered in the Library’s research briefing on recent aid cuts (see section 2.4). Both receive funding from the FCDO, but other funds are raised by exam fees, contracts and other commercial activity (in the case of the British Council) and the BBC licence fee (for the BBC World Service). Both have warned of making extensive programme cuts in response to funding pressures.

The National Audit Office is currently conducting an inquiry into the financial sustainability of the British Council, to be completed by summer 2026.

Contents of the FCDO’s Supplementary Estimate

The FCDO has produced an explanatory memorandum, which sets out the details of its final spending plans for 2025/26. This contains its spending broken down by Departmental Expenditure Limits (DEL) and Annually Managed Expenditure (AME).

Spending can be further broken down into four categories:

• Resource DEL (planned day-to-day spending): this is spending on staff and other running costs, on goods and services and grants.
• Capital DEL (planned investment spending): this is spending covering the purchase and sale of assets, loans, investments and capital grants.
• Resource AME (demand-led day-to-day spending): tends to relate to provisions and technical accounting adjustments.
• Capital AME (demand-led investment spending): in FCDO’s case, this represents capital investments into the UK’s development finance company British International Investment (BII).

The FCDO Estimate allocates the entire departmental budget, covering spending on diplomacy, arms-length bodies and development. The FCDO spends the majority of the UK’s ODA budget and therefore the Estimate contains significant FCDO ODA spending. However, ODA spending within the Estimate is not specifically labelled, and is spread across each budget category. This makes it impossible to track the precise level of FCDO ODA spending through the Estimates process. Even so, the explanatory memorandum shows that the significant cuts to the FCDO’s DEL budgets are driven by in year reductions to planned ODA spending.

Day-to-day spending (Resource DEL)

The FCDO has set its Resource DEL budget to decrease by £457.3 million (5.3%) from £8,674.6 million to £8,217.4 million. The main drivers of this decrease are:

• £259.0 million reduction in Official Development Assistance (ODA) spending during the year following the announcement of a reduction from spending 0.5% of Gross National Income on ODA to 0.3% in 2027.
• £36.0 million reduction due to lower than anticipated foreign currency fluctuation costs;
• Routine budget transfers to other departments for the Integrated Security Fund, including £26.0 million to the Home Office, £15.0 million to DSIT and £13.4 million to the MOD;
• £12.0 million budget exchange to the next financial year, relating to the Integrated Security Fund; and
• £12.0 million reduction because of FCDO Voluntary Exit Scheme costs being delayed from 2025/26 into 2026/27.

Investment spending (Capital DEL)

The FCDO has set its Capital DEL budget to decrease by £228.3 million (-6.6%) from £3,438.7 million to £3,210.5 million. The main drivers of this decrease are:

• £179.1 million of reduced Official Development Assistance (ODA) spending during the year following the announcement of a reduction from spending 0.5% of Gross National Income on ODA to 0.3% in 2027; and
• £55.0 million budget exchange where capital expenditure has been shifted from 2025/26 into 2026/27.

This was partially offset by an increase in Capital DEL of £5.9 million due to a budget switch from Resource DEL for capital grants in the Integrated Security Fund, and a £3.7 million increase due to a transfer in from DESNZ for loans and guarantees in the International Financing and Facility for Education.

Demand-led spending (Annually Managed Expenditure)

FCDO has set its Resource AME budget to decrease by £138.7 million (-25.7%) from £538.7 million to £400.1 million. The total Resource AME allocation is for ‘Other central programme and technical costs’. The decrease was caused by an updated forecast following review of outstanding foreign exchange contracts and Financial Guarantee commitments expected by the end of the year, particularly for Ukraine.

The FCDO Capital AME budget remains unchanged at £481.0 million. This funding is to recapitalise British International Investment, the UK’s publicly owned development finance institution.

Contingent liabilities

A contingent liability is a potential financial obligation that may arise depending on the outcome of an uncertain future event, such as legal action or financial guarantees being called in. The estimates memorandum sets out changes to contingent liabilities in-year.

The FCDO’s contingent liabilities have decreased by around £6.0 billion from the Main Estimate 2025/26 to the Supplementary Estimate 2025/26. The decrease mainly relates to financial guarantees of £4.4 billion which were included in the Main Estimate as there was a possibility of these being agreed at the start of the year but are no longer expected to be signed in the financial year 2025/26. These included World Bank guarantees of £1.6 billion for South Africa, £1.6 billion for Indonesia and £1.3 billion for Ukraine. The decrease for Ukraine is also partially attributable to favourable interest and foreign exchange movements, which reduce exposure.

In addition to this, favourable foreign exchange movements and interest rates have resulted in a reduction of £0.3 billion for the remainder of the guarantee portfolio and a reduction in contingent liabilities on callable capital balances of £1.1 billion.