UK PM Rishi Sunak may freeze foreign assistance to balance country's economy: Report

UK PM Rishi Sunak is considering freezing UK's foreign aid for an extra two years, in an attempt to balance Britain's budget. Currently, the UK spends 0.5 per cent of its national income on foreign aid, but it was expected that by 2024-2025, this number would revert back to the original 0.7 percent of national income. However, given the precarious condition the UK economy is in, UK PM Rishi Sunak is considering extending the freeze on UK foreign aid up until 2026-2027, as per a report by Sputnik news. This would reportedly save the UK around £4 billion per year. 

On Friday, speaking on the state of the UK economy, Sunak had said that "difficult decisions" on public spending and tax increases lie ahead, adding that the decisions will be taken with "fairness at heart", as per a Telegraph report. As inflation is higher than expected and so far, the UK has been unable to tame it down, the UK government is considering deeper cuts across multiple ministerial departments. Sunak's decision to freeze the amount of money being spent on foreign aid is controversial. 

Why is freezing foreign aid controversial? 

This move is considered controversial because UK law stipulates that Britain's spending on foreign aid must amount to 0.7 percent of the GDP. This was lowered to 0.5 percent due to the exceptional challenges that once in a hundred year pandemic presented, a time where the UK government had to provide monetary support to vast sections of the British populace, draining the finances of UK. Not blowing the debt out of proportion is Rishi Sunak's priority, an economic policy aimed at maintaining a sustainable level of debt. 

Other options Rishi Sunak is considering

According to the Economist, another option Rishi Sunak is considering to fill the financial blackhole is shelving the planned reduction of surcharge on bank profits. Currently it is an 8 percent surcharge in addition to the 19 percent corporation tax. There were plans to reduce the surcharge from 8 percent to 3 percent, however, if this planned deduction in surcharge is scrapped, UK can raise billions of pounds from the banks, billions of pounds it desperately needs. Even this money won't be enough and the UK will have to make drastic cuts in public spending, which will mean cuts to the NHS, which will lead to electoral backlash, or raising taxes on other corporations as well. 

On Friday, whilst visiting a hospital in North London to meet with the patients, Rishi said that, "The Chancellor has already said of course difficult decisions are going to have to be made and I'm going to sit down and work through those with him. But what I want everyone to know is that we need to do these things so that we can get our borrowing and debt back on a sustainable path. That's important because it means that we can get a grip of inflation if we do that. It means we can limit as best as possible the increase in interest rates, which is important. But as we do that, I want people to be reassured we will always do it with fairness at heart, we will protect the most vulnerable and ensure that we can continue to grow the economy in the long run," as per a report by The Telegraph.