Ben Quinn and Anushka Asthana
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| A cement factory in Dire Dawa, Ethiopia. British investment through the CDC has supported the building of the state-of-the-art plant, which opened in 2013. Photograph: Gavin Houtheusen/DfID |
Transparency concerns fail to thwart passage of bill lifting cap on aid channeled though Department for International Development’s investment arm
Plans for a dramatic increase in the amount of aid that can be channeled through the CDC Group, the government’s controversial private equity arm, have moved closer to fruition after crucial legislation passed through the Commons on Tuesday.
The commonwealth development corporation bill, which will allow the government to lift the cap on aid funds spent through the CDC from £1.5bn to £6bn, was approved by MPs despite criticism of the organisation.
The bill allows for increases of up to £12bn without new primary legislation.
The vote followed a parliamentary debate that exposed the stark political divisions about the future direction of aid spending.
Development minister Rory Stewart said Britain had a “moral obligation” to invest in the CDC, which he described as a proven development model.
“CDC investment combines the rigour of the private sector, the focus on markets, the values of the public sector [that] reflect the values of the British public, reflect the British public that cares about poverty,” said Stewart.
But the CDC – formerly the Commonwealth Development Corporation – which is wholly owned by the Department for International Development (DfID), was attacked for its lack of transparency, its use of offshore tax havens and the focus of its investments, which continued to favour wealthier countries at the expense of poorer ones, critics argued.
Kate Osamor, the shadow international development secretary, cited a finding by the National Audit Office that the CDC was unable to demonstrate adequately its ultimate objective of creating jobs and making a lasting difference to people’s lives in some of the world’s poorest places.
“In spite of CDC’s very welcome improvements, the NAO’s recommendations show that we should not forget that it remains very much a work in progress for this organisation to demonstrate transparently and robustly that it is achieving its objectives,” she said.
Labour MP Stephen Doughty, who tabled a series of amendments to the bill, said many unanswered questions about the CDC needed to be addressed before such a major increase in investment from DfID could be countenanced.
“This, fundamentally, is about choices, about where we spend those precious, relatively small amounts of development assistance,” Doughty said.
He pointed out that the overall proportion of CDC spending going to the least developed countries was still significantly less than that going to middle-income nations.
Stephen Twigg, the chairman of the Commons international development committee, said the CDC had become more transparent, but that more needed to be done to ensure money was being spent as it should be.
“One way this could be achieved would be to allow the Independent Commission for Aid Impact to play a bigger role – for example, carrying out a regular assessment of CDC’s investments,” Twigg said.
The CDC’s current investment plan has now expired, and Twigg said MPs had yet to see proposals for the period 2017 to 2021. He criticised the government for bringing forward moves to increase the investment threshold before that had happened.
Tory MP Flick Drummond said that, while a cross-party consensus often reigned when it came to development matters, on this occasion there was a broad division.
Defending the CDC’s use of offshore tax havens, she said: “The purpose of the CDC is to go into places where conventional investors fear to tread. I hope that there will be a time when the regulatory system will be robust enough so that we will not have to use offshore centres, but we are not at that point yet.”
The bill will now proceed to the House of Lords.
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