This blog is the second in a two-part series. The first part introduces the aid agency shutdown situation in the US, examining the consequences not only for beneficiary countries and global development, but also for the rule of law and democracy in the US.

On 3 February 2025, US president Donald Trump ordered the closure of the United States Agency for International Development (USAID). While changes to US foreign aid are not new, this decision marked a significant departure from past practice, as it was the first time that a Western donor government shut down an independent aid agency. In a previous blog, we explored the potential motivations for this decision as well as its consequences for global development and US influence in the world.

Despite the uncertainty around current developments, the decision of the Trump administration indicate the direction of travel for global development: aid cuts are not limited to the US but extend to other major donors, including European ones, as they realign their political priorities and confront escalating demands from the US government on defence spending. Hopes that European donors would be a ‘white knight’ for global development quickly evaporated as the UK government under Keir Starmer announced further cuts to the UK aid budget—toward 0.3 percent of national income. Starmer regretted the cuts and explained they were inevitable given the need to expand defence spending. Yet, this decision marks a complete U-turn, as Labour had promised to increase the ODA budget to 0.7 percent as soon as economic circumstances would allow, following substantial aid cuts to 0.5 percent under Boris Johnson. Other European governments—avoiding similar policy shifts so far—had reduced their aid commitments already in the previous year after the full Russian invasion in the Ukraine. While hopes are that philanthropic foundations might fill the funding gaps, their response to the public-sector aid cuts was limited. Moreover, their financial firepower is much lower than that of donor governments.

In this ongoing process of adjusting priorities for public spending, foreign aid is losing out because it lacks a strong constituency. What aid does and how it works is hard to explain to taxpayers, especially in an age of information overload and fast-paced (social) media. Our own research based on survey experiments confirms this suspicion. We found that people quickly withdraw support for aid once they learn about ‘aid scandals’, such as irregularities in the implementation of aid projects. This popular punishment may appear out of proportion with the actual amount of aid that is affected by irregularities. It poses a genuine dilemma for how transparent aid agencies should be. In fact, aid agencies are continuously ranked among the most transparent entities. In an attempt to demonstrate accountability to their taxpayers, donor governments often resort to earmarking aid for specific projects or recipient countries, reinforcing the perception that multilateral aid requires tight control rather than broad, strategic investment.

There is an urgent need to shift public perception of aid from charity to a long-term investment in national security and global stability, particularly as efforts to curb migration flows to Europe and North America highlight the necessity of stepping up development and climate finance. While aid cuts may be politically savvy in the short term, they are strategically unwise and morally questionable. As Western donors retreat, a vacuum is left behind—but how emerging donors decide to fill it remains uncertain. On one hand, they might step in to replace Western donors, challenging the norms and principles of the US-led multilateral order. On the other hand, they may lack the resources to fully take over and instead engage selectively, investing in development where it serves their strategic interests while exploiting fragility elsewhere to destabilize rivals.

This is not the first time in history that donors had to cut aid. Even when such cuts are unavoidable, the process must be managed better, to avoid interruptions to live-saving interventions. In the long run, the traditional approach to aid must change, as it has proven to no longer be viable under the current world order. Donor governments and partner countries should talk about a future aid architecture that meets their needs. Such aid architecture needs to be built on trust and equal partnerships. At the same time, European donors must coordinate their aid to preserve their influence, avoid wasteful duplication, and maximize the impact of their resources. European donors should champion a distinct aid model rooted in multilateralism and their core values. This would offer an alternative to the emergent US approach, which leverages public money to mobilize private investments abroad—essentially granting public subsidies to privately-owned social infrastructure held by institutional investors. Through core support and strategically earmarked contributions to multilateral organizations, European donors could promote their vision of global solidarity while enhancing cooperation and promoting collective efforts towards strengthening and reforming the global aid architecture.

This blog was originally posted on the Centre for Public Policy website.

First published: 16 March 2025

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