31 Oct Autumn Budget 2024: Implications for UK Foreign Policy

On the 30th October, the Chancellor of the Exchequer, Rachel Reeves, presented the 2024 Autumn Budget. The first budget of the new Government, and the Labour Party’s first budget for more than 14 years, it introduced sweeping financial reforms. But what does it mean for UK foreign policy?

Defence

1. Defence budget to increase by £2.9 billion – Across foreign policy, defence came out best in the budget, with a £2.9 billion increase in the defence budget announced. This keeps defence spending well above the NATO spending target of 2% of GDP, while the path to reaching the target of spending 2.5% GDP on defence will be outlined at a ‘future fiscal event’. Critics will argue the increase isn’t enough, growing only in line with the economy and quickly being used up in funding the 6% pay increase that has been awarded to serving personnel and the urgently needed replenishment of UK military stockpiles that have been depleted by support for Ukraine. Nevertheless, in the context of a budget which saw real-term cuts for many departments, and a number of very tough spending decisions, this increase in defence spending should be seen as a welcome recognition of the importance of UK defence in a period of global instability.

2. Ongoing support for Ukraine – The budget also includes a commitment to spending £3 billion per year on military assistance for Ukraine to counter Russia for ‘as long as it takes’. The ongoing commitment stands as a striking signal of the UK’s unwavering commitment to Ukraine and to European security under the new Labour government, which will be strongly welcomed by our allies in Europe. It is particularly important in the context of the upcoming US election, which has placed European defence spending, and European responsibility to defend its own security arena, under the spotlight.

3. More money for intelligence services – There is also an additional £340 million allocated to the Single Intelligence Account (SIA), which includes the Secret Intelligence Service (SIS/MI6), Government Communications Headquarters (GCHQ) and the Security Service (MI5). In a time of growing transnational threats, not least cyber threats, misinformation, and hybrid warfare, this uplift, taken alongside the extra money for the defence budget, represents a clear effort to show that Labour is a ‘safe pair of hands’ when it comes to national security.

Soft Power

4. Increase in funding for BBC World Service via FCDO – A surprise but very welcome commitment is the announcement of additional FCDO funding for the BBC World Service, to protect existing foreign language service provision and deliver globally trusted media. There is no detail in the budget on the numbers allocated, so it is difficult to assess what the precise impact will be, but it is a positive and timely acknowledgement of the role the World Service plays in tackling disinformation and providing trusted news in countries where that is often very difficult to access. BFPG co-convenes the UK Soft Power Group and was therefore delighted to see the World Service’s key soft power role recognised, an important sign that this government is taking an increasingly strategic approach to soft power.

5. Distinct absence of higher education – Sometimes a lack of attention is as notable as major policy pronouncements. It is no secret that the UK’s higher education sector is in dire straits, with growing expectations that at least one university will go bust in the near future without urgent intervention. Yet, while the announcement of plans for an additional £20 billion for research and development (R&D) will be welcomed by universities, the budget doesn’t lay out any other plans for how to move universities to a more sustainable financial footing. The UK’s universities and higher education institutions are a key part of the UK’s soft power and their uncertain future will have implications for the UK’s global influence as a leader across education, research and science and innovation.

6. A mixed picture for other soft power actors – For other areas of UK soft power, the picture is more mixed. Commitments to raise Grant-in-Aid for the National Museums and Galleries, and the announcement of a package of cultural infrastructure funding to provide additional capital investment to support cultural organisations, will provide some much needed relief. A 10% increase in funding for UK Sport’s Olympic and Paralympic programme has also been welcomed. However, the increase in employers’ national insurance contributions, alongside changes to minimum wages, will impact businesses across the board, including those in the soft power sector.

International Development

7. £1.6bn cut to aid budget – The budget commits to spending 0.5% GNI (£13.3 billion) on overseas development aid (ODA) but does not renew the former Government’s £2.5 billion top up to the aid budget, which was introduced to offset some of the over £4 billion being spent on hotels for asylum seekers in the UK. The budget references plans to reduce spending on hotels for refugees and in turn ‘create more space’ to spend ODA overseas, but, in the meantime, the budget to spend overseas on development will be severely squeezed.

8. Return to 0.7% is a way off – The commitment to return to 0.7% ‘when the fiscal circumstances allow’ is mentioned, but so too is the fact that, based on the Office for Budget Responsibility (OBR)’s Spring 2024 forecast, ‘the ODA fiscal tests are not due to be met within the Parliament’. There will be an annual review of whether the fiscal circumstances have been met but this feels like expectation management, and a return to 0.7% is likely to be a while off. 

Overall Reflections

9. Foreign policy has to link to the five missions – The budget references how FCDO spending is ‘actively contributing to growth and jobs, safer streets, cleaner energy, health security, and stemming irregular migration’. Foreign policy doesn’t fit particularly neatly into these five missions, which are primarily domestically-focused, however Reeves has made it clear that foreign policy is not immune from the need to think within those terms.

10. Overall a relatively good budget for UK foreign policy – With the fairly substantial caveat of concerns about the impact of cuts to ODA spending, within the context of some tough tax and spending decisions, this is a relatively positive budget for UK foreign policy. It doesn’t make huge new commitments or fund major new global leadership opportunities for the UK but it was never going to. What it does do is provide opportunities for the UK to maintain its position on the world stage, even in a challenging economic and geopolitical environment. In the current context, we couldn’t expect much more.