UK Aid Policy: Global Funding Trends

Noah Law Excerpts

Tuesday 7th July 2026 Westminster Hall

[Noah Law (St Austell and Newquay) (Lab)]

It is a delight to participate in the debate, and I thank the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) for securing it. I refer to my entry in the Register of Members’ Financial Interests. I am a member of the IDC and a former development banker. I share many of my IDC colleagues’ reflections on the need for clarity and to be steadfast in our pursuit of the overarching goal of the UK’s foreign development policy, which is poverty alleviation. Our report sheds a light on the fact that there is a much greater need for clarity, transparency and measurability of the outcomes we are looking to deliver in particularly constrained circumstances.

That said, I wholeheartedly support the Government’s shift from the mindset of donor to that of investor. That is necessary not just because it is what many developing countries are asking of us, but because it is the only way we will get the scale of investment that is needed to transform the fortunes of the world’s poorest countries. Whichever way we look at it—whether it is the sustainable development goals financing gap or any other interpretation—the scale of capital need is enormous and cannot be met by the multilateral development banks, let alone our development aid budgets.

Let me move on from the hand-wringing we are all so used to in our favourite sector, towards a much more normative, positive pitch for the role the UK Government can play as we head into the G20, where we have the chance to set the tone of development globally. We can play a unique role in three areas: first, the global debt system; secondly, our influence on multilateral development banks and development finance more broadly; and thirdly, the mobilisation of private sector investment. I know the Government are incredibly invested in those three themes, which align with our shift from donor to investor, but let me be clear about what will work to deliver shifts across those three agenda items, at least in my experience.

On global debt, the UK is home to the vast majority of emerging markets’ sovereign debt. England is the jurisdiction under which it is governed, with the other key jurisdiction being New York. In my mind, it is incumbent on this jurisdiction to try to right the wrongs addressed by the private Member’s Bill introduced last year by my hon. Friend the Member for Southgate and Wood Green (Bambos Charalambous), who is no longer in his place. It is incumbent on us to build not just a more sustainable debt system, but ultimately the financial capacity of these countries, and to take the agenda very seriously.

I welcome the work of the London Coalition so far, including the steps to strengthen the common framework and the term sheet, which suggests pause clauses that might prevent some of the frankly usurious debt obligations on developing countries from building up during restructurings. I also welcome the need for transparency, which is another workstream of the London Coalition. But we must ask ourselves whether this is sufficient. Are voluntary measures and the self-regulation of the City as the leading emerging markets bond market sufficient?

As a key player in the G20, can we take a stand on delivering a much greater ambition to ensure that best practices move from being voluntary to being a gold standard for the market? If there are concerns about the market impact, one has only to look back to the previous round of global debt reform under Gordon Brown, and the concerns raised by the City then. Let us be honest: not all investors are created equal. A big pension fund that just happens to have exposure to Ghanaian sovereign debt is not the same as a debt-distressed hedge fund.

Creditors will have different views about whether a real ambition from the UK to put reforms on a statutory footing will scare the markets. I encourage the Government to engage very strongly; I would be happy to provide evidence from the City and from economists working on global sovereign debt to support the fact that, rather than being all doom and gloom, this might be an opportunity to reset the sustainability of the sector and, in doing so, build financial capacity.

With that financial capacity, we could mobilise a far greater sum of investment than ever before. I know that is the ambition of the Development Minister, Baroness Chapman. If we can get the financial capacity right for these countries, it may be that the cuts to aid will pale into insignificance—to put it bluntly—compared with what investment could be mobilised if we get the macroeconomic structure right.

Multilaterals also have a role in mobilising private capital, but some, particularly larger, multilaterals, which we have fervently supported, are currently not taking on sufficient risk, and in many cases are crowding out commercial banks and are too focused on debt. They need to be more catalytic in their work. BII sets a good reference point, and it also serves a good reference point for project development, or what the International Finance Corporation would call upstream project development.

[Brian Mathew (Melksham and Devizes) (LD)]

The hon. Member mentioned multilaterals. We have seen massive cuts to aid. As many people will know, I worked for 30 years in the WASH sector, which had been cut by 85% before the recent aid cuts, and is so important in changing people’s lives. Does the hon. Member agree that, given the movement to multilateralism and multilateral support, we should see that channel used to direct much larger funds to the very poorest and to sectors such as WASH—although not to WASH exclusively—so that we can see a real improvement in people’s lives around the world?

[Noah Law]

I agree that alongside the shift to more risk capital, which will also support that goal, and more upstream project development with local partners, there needs to be a focus on the world’s very poorest, and on getting capital into markets that do not currently have the capacity to support it. We have to move on each of these fronts: on global debt reform, on engagement with the multilateral development banks and our own development finance institutions, and on the private sector. Only by getting the capacity right, and by getting the work that the MDBs and the DFIs do right, will we be able to mobilise capital at scale. In my experience, WASH in particular suffers from being uninvestable for development finance, partly because the ability of DFIs to provide support at the municipal level and for city regions is underdeveloped. I urge the Minister to work with, for example, Urban 20 colleagues to address the issue.

[James Naish]

My hon. Friend mentioned multilaterals. I wanted to put on the record my concern, shared by a number of IDC members, that it will be much harder for us to influence the multilaterals when most of our money is going there, rather than to bilateral aid. Does my hon. Friend share my concern that we need to resource appropriately to achieve maximum leverage within the multilateral system?

[Noah Law]

I do share my hon. Friend’s concern. In a time of constrained resources, there is a bit of a knee-jerk reaction to move everything into the multilateral space to get more bang for our buck but, as we have seen, it is not as simple as that. One does have to be wary when trying to make that money go further. I am glad that there are examples, particularly on the climate finance front, of where our Government have stepped up to ensure we maintain the agenda of the multilateral development banks.

To sum up, we need to be serious about the potential need for a statutory footing for some of the reforms to the global debt system, which the UK is uniquely well placed to address. We need to push our multilateral development banks and development finance institutions to go further, to take more risk and do that upstream development work. In doing so, we need to mobilise the private capital that at the minute is unable to get to the world’s poorest countries.