Ms Mordaunt is due to announce the wide-ranging overhaul today as she appeals to private investors to prop up the Government’s bloated aid budget so the UK taxpayer doesn’t have to.
The major shake-up of the Department for International Development (DFID) spending would see investors such as pension funds help fund the UK’s vast foreign aid bill.
A source close to the Development Secretary told The Sun: “How we do aid is changing.
“It’s now much more about projects that help a country’s economy, which means there is an opportunity there for private money to make a return.
“Penny believes that means when investors step in, the taxpayer can step back, freeing up billions to spend elsewhere in Government.”
Ms Mordaunt will argue in a speech today the renewed strategy is the only feasible way to ensure the UK’s colossal £13billion aid budget remains sustainable amid increasing pressure on stretched Treasury funds.
Ms Mordaunt, who is among those touted to be a future Tory leader, plans to persuade the Organisation for Economic Cooperation and Development (OECD) to reform rules on aid spending – known officially as official development assistance (ODA).
The OECD currently states: “ODA is defined as government aid designed to promote the economic development and welfare of developing countries.”
Under OECD rules, the UK Government must give 0.7 percent of its Gross National Income (GNI) to ODA.
The 0.7 percent of GNI target means for every hundred pounds made in the UK, seventy pence goes towards foreign aid.
According to Full Fact, the UK’s independent fact-checking charity, in 2016, the UK spent £13.4billion on overseas aid, in line with the 0.7 percent target.
Ms Mordaunt is expected to underscore today the UK Government is prepared to work with the OECD to work towards reform of its current approach.
But she will also highlight the UK’s right to act unilaterally if the watchdog refuses to compromise and accept the proposed changes.
Other nations, such as the Netherlands, have already managed to swerve OECD rules.
Ms Mordaunt will hope the UK can follow suit as she gears up for talks.
However, the Government must honour its commitments to projects it has already pledged help with.
Ms Mordant’s new plans have the backing of Chancellor Philip Hammond, The Sun reports.