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Whitehall's planned foreign aid cuts condemned as immoral

Parliamentary rebels in London organise to stop government's reneging on funding pledges just days ahead of G7 summit

When the heads of state and government of the Group of 7 biggest economies meet in Cornwall on 11-13 June, their host, Britain's Prime Minister Boris Johnson, says he wants to focus the summit on global trade, strengthening the international system against pandemics and tackling climate change (AC Vol 62 No 2, A scramble for vaccines). Joining the summit will be South Africa's Cyril Ramaphosa, India's Narendra Modi and South Korea's President Moon Jae-in.

A modest accord on a global minimum corporate tax rate of 15% signed by G7 finance ministers over the weekend was part of efforts to revive international cooperation.

The Organisation for Economic Cooperation and Development (OECD) reckons it could raise an extra $50-$80 billion a year, depending on the final agreement. There are still sharp differences between the United States and European states over the taxation of giant tech companies such as Facebook and Google.

Neither is the 15% deal likely to be a bonanza for African economies. It could boost their company tax revenues by around 4%, much less than the big G7 economies.

The African Tax Administration Forum (which groups revenue authorities across the continent) wants to lower the revenue threshold of the companies included in the accord to €250m ($304m) from €20bn but the bigger economies don't want to widen its scope to include the smaller multinationals.

It will be up to Ramaphosa to argue Africa's corner on the issues of illicit financial flows and tax avoidance at the summit on Friday.

Before the summit opens, Johnson has to deal with a group in the British parliament opposing his government's plan to drop its commitment to allocate 0.7% of gross national income to foreign aid, cutting it to 0.5%. That would translate into a 42%, or a £4bn ($5.6bn), cut in Britain's foreign aid budget this year.

The opponents, who include many from Johnson's Conservative Party and most opposition MPs, say it makes no moral or economic sense. They are trying to force a special parliamentary vote on the matter on Monday (7 June).

The Conservative Party included the pledge to maintain aid levels in its last election manifesto. This year, Britain receives a $25bn inflow of reserves from the International Monetary Fund's Special Drawing Rights (SDR) issue.

This local fight over aid will add pressure on the Johnson government to do more on vaccine equity and climate adjustment finance, two key topics at the summit this week. Opponents of the aid cuts argue that by unilaterally cutting contributions to education and health funding, Britain is undermining its diplomatic clout.



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