Managing Cuts to Government Aid Funding: What Charities Need to Know

Charities working in the international development and humanitarian sectors are facing an exceptionally challenging period.

The UK Government has significantly reduced its Official Development Assistance (ODA) budget, with aid spending set to fall from 0.5 per cent of Gross National Income to 0.3 per cent by 2027/28.

The Foreign, Commonwealth and Development Office's (FCDO) published spending plans to 2028/29 indicate that the total value of FCDO programmes will fall by around 31 per cent compared to 2025/26 levels.

For many charities, these are not abstract figures, as many lifesaving programmes have already closed or been scaled back significantly as a result of cuts to aid budgets.

The steeper funding cuts from April 2026 onwards mean that organisations that have not yet fully felt the impact are now urgently planning for a very different funding environment.

What does this mean in practice?

For charities significantly dependent on ODA or FCDO funding, the implications are immediate and severe.

However, the broader context is also challenging, as UK charities collectively deliver over £14 billion of public services on behalf of central and local government, with many already reliant on fundraised income to plug gaps in contracts.

Local authority funding is under sustained pressure, further reducing grant and commissioned income.

Trustees and finance teams should consider the following:

• Scenario planning – Model the financial impact of funding reductions across a range of scenarios, not just the most optimistic, and ensure reserves policies are reviewed in light of these projections.
• Programme review – Assess which activities are most at risk and which are core to the charity's mission. Difficult decisions about programme prioritisation may be necessary.
• Cost structure review – Examine whether the organisation's cost base is appropriately calibrated to a lower-income environment and whether overhead savings can be achieved without compromising service delivery.
• Income diversification – A reduction in Government or grant income may accelerate the need to develop alternative revenue streams.
• Communication with stakeholders – Funders, partners and beneficiaries should be kept informed of changes to programmes or service delivery. Transparent communication protects trust and may open conversations about emergency or transitional funding.

The Spending Review did not reverse the cuts to UK aid scheduled from 2027, and the National Council for Voluntary Organisations (NCVO) notes that these reductions come at a time when many charities are already struggling with increased demand from beneficiaries.

How can we help

Adjusting to a lower-income environment raises difficult financial and strategic decisions, often at short notice.

If you would like to discuss the impact of government funding cuts on your charity, our team would be happy to help.

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