UK plans to boost development aid when fiscal circumstances allow, minister says

By David Lawder

RIO DE JANEIRO (Reuters) - Britain's new Labour government aims to restore overseas development spending to 0.7% of economic output when "quite difficult" fiscal circumstances allow, development minister Anneliese Dodds said on Wednesday.

Dodds told Reuters in an interview on the sidelines of a meeting of G20 finance leaders in Brazil that development was a "critical priority" for the government, including addressing climate change, poverty, hunger and migration.

Britain used to devote 0.7% of output measured as gross national income to overseas development aid, but the Conservative government ousted by Labour this month cut that level to 0.5% in 2021 to help pay for the COVID-19 pandemic.

Dodds said the 0.7% spending level was "really important" for Labour when it was last in government between 1997 and 2010, and that a strong global aid role was in its DNA.

"So we are really determined to do what we can to try and get back to 0.7, to make sure that we're fulfilling those responsibilities, that we're ultimately acting in our country's interest, in the global interest," she said.

"But we are going to have to do that, as I said, when fiscal circumstances allow, and fiscal circumstances are quite difficult in the UK at the moment," she said, providing no time line for the return to 0.7%.

Dodds said the previous government had diverted funding to help house migrants and refugees, rather than spending that aid abroad, and the new government would change that by shifting the focus to tackling the root causes of illegal migration.

An already announced 84-million pound ($108.5 million) funding package will not include housing funds, focusing instead on "long-term drivers" of migration such as climate crises, armed conflict and difficult economic circumstances, she said.

Asked whether Britain would support a future capital increase for the World Bank, Dodds said the government was supportive of the goal of a bigger bank but that it was important to first focus on reforms of the development lender to better address climate change and other global challenges.

She said Britain could supply the expertise of the City of London banking sector to drive reforms and attract private capital to financing the clean energy transition.

Touching on the G20 Common Framework on debt restructuring - a platform to help get overstretched countries back on their feet - Dodds said Britain would push for debt service "holidays" for countries that are impacted by the climate crisis.

This, she said, would make debt for developing countries ultimately "more robust".

($1 = 0.7742 pounds)

(Reporting by David Lawder, Editing by Timothy Heritage)