First USAID closes, then UK cuts aid: what a Western retreat from foreign aid could mean

Emergency programmes are already in disarray, while in the long term, revisionist powers like China will seize chances to build influence.

Expert comment Updated 5 March 2025 4 minute READ

Olivia O’Sullivan

Director, UK in the World Programme

Jerome Puri

Research Analyst, UK in the World Programme

The UK’s prime minister Keir Starmer announced last week the UK would fund increased spending on defence by cutting its aid budget from roughly 0.5 per cent of gross national income to 0.3 per cent. His development minister, Anneliese Dodds, resigned on principle over the extent of the cuts on Friday. The decision comes just weeks after President Trump ordered a freeze on US aid spending and told European nations they needed to boost defence spending considerably. 

The UK’s aid cut was one in a series made since 2020. The country’s aid budget is now at its lowest for decades, with funding for long-standing recipients and humanitarian emergencies particularly hit. The UK is not alone – France and Germany have also cut aid budgets in recent years. 

But the European cuts, while meaningful, are dwarfed by the impact of the Trump administration’s decision to shutter USAID and freeze almost all of its federal aid spending. The move calls into question the modern system of aid and development, in which the US has had a central role, including funding major UN agencies and supporting massive basic healthcare programmes.   

Consequences of the USAID shutdown 

On 20 January 2025, the Trump administration issued an executive order imposing a 90-day freeze on all US foreign development assistance. By the end of the day on 1 February, the website of USAID, which manages most of the roughly $60 billion US aid budget, was offline. 

The USAID shutdown will have wide-reaching but potentially not so visible effects, because the constituencies affected are not powerful.

There are legal challenges to the closure, including from members of Congress, and some suggestions the administration may reconstitute a diminished agency under the State Department. But in the past week, the administration announced the initial review was over and thousands of aid delivery contracts were terminated.

The USAID shutdown will have wide-reaching but potentially not so visible effects, because the constituencies affected are not powerful. In 2023, the US accounted for 29 per cent of all OECD countries’ aid funding – the UK was just over 8 per cent. 

The US is a foundational funder of key international agencies – providing $2 billion of the UN refugee agency, UNHCR’s $4.8 billion of donor funding in 2024, for example. 

The Center for Global Development finds the US represented a fifth of all foreign assistance to eight poor countries, mainly for basic healthcare and emergency assistance. Critical Western security partners, like Jordan, depend on USAID to support essential services and for refugees.

Waivers of the freeze for some life-saving aid were announced, but with staff laid off and programmes disrupted, there is significant confusion about whether these waivers can or will be applied. 

Humanitarian workers have told US news sources that PEPFAR, the flagship anti-AIDS programme, is in disarray with drugs going undelivered – despite the administration saying some HIV funding would resume. 

The World Health Organization reported that HIV treatments in 50 countries have been suspended, with polio and mpox efforts also affected. Support for Ukraine, the largest USAID recipient ($37 billion since the invasion), including agricultural, psychological and medical aid, is all now in doubt.

UK weighs strategic calculations against aid

For the UK and others, cuts to aid have come due to pressures to build military capabilities and maintain close ties with the US. In the UK, pressures on defence are long-standing. Its Defence Equipment plan has gaps in excess of £15 billion. Its parliament has warned that the military could not sustain a prolonged fight. Its force size is not thought to be enough to meet NATO commitments, let alone any expanded long-term presence in Europe. 

The UK should use this moment to talk to Global South countries and emerging economies about what a new aid and development system could and should look like.

Nonetheless, the Labour government came into office seeking to recapture the UK’s leadership in development. Its welcome that it is setting out how it will fund increased defence spending, rather than making unfunded announcements. But the £6 billion saving from aid is unlikely to plug defence gaps – and certainly will not fund the transformative choices potentially needed to backfill US capabilities. 

The cuts have a two-year timeframe which offers some space to work with partners to address urgent aid gaps. The UK is seeking to ‘reset’ its relationships with the Global South. If it wants a meaningful role in tackling poverty and shared global problems, the UK should use this moment to talk to Global South countries and emerging economies about what a new aid and development system could and should look like – beyond the previous model underpinned by US aid spending. 

What next for international aid 

The flaws in the existing Western model of foreign aid are well-documented. Critics argue aid can create unsustainable dependencies and is unpopular with domestic constituencies facing cost-of-living challenges. Trump’s administration does not want to improve the model, or redraw lines of accountability to get better results. Their clear intention is to withdraw the US from its central role in global humanitarian and development funding.

The West’s retreat from aid will leave an obvious opening for revisionist powers to build further influence in developing countries. China continues to signal investment commitments in Africa. At the 2024 Forum on China–Africa Cooperation, it pledged $51billion over three years in loans and traditional aid. The Gulf states are also increasing humanitarian aid efforts, largely in strategically significant regions, such as the Horn of Africa. 

The UK…can reduce the backlog of asylum claimants at home…so that more goes to urgent priorities overseas. 

Unsubstantiated charges made by the Trump team – that USAID was founded on fraud or part of a wider conspiracy – also reinforce autocratic narratives about US and Western aid in authoritarian countries, jeopardizing Western-aligned projects and organizations in those places. 

In light of the cuts, some experts argue that this is the time for aid-recipient countries to reduce aid dependency and build more autonomous control over their own health and education systems and wider policies. 

The UK is reviewing its approach to development. Instead of a focus on bilateral aid, its likely long-term options are to continue to seek strategic influence in the wider international system, including reforming international financial institutions and working with developing countries to develop their own growth strategies. 

Many developing countries face unsustainable debt crises. Although the levers available to the UK are limited, finding ways to reverse the flow of capital out of the world’s poorest countries to service this debt is critical.

The UK may need to look to new partners – including Gulf countries and other middle powers – to help fund these efforts. It could do more to consolidate work with European allies who face similar fiscal pressures and geopolitical risks. It can also reduce the backlog of asylum claimants at home which absorbs aid, so that more goes to urgent priorities overseas. 

But it seeks to do all this with a much-diminished budget. And while longer-term thinking about new aid models is important, in countries around the world many people depend on US largesse, particularly for medicine, security in refugee camps, basic humanitarian aid, and vaccines. They are now cut off from that critical support. Given the UK’s desire to renew relations with leaders in the Global South, it should prioritize – even with fewer funds – addressing these emergency gaps wherever possible.