The CDC HQ, 123 Victoria. Google Street View

Under the principle of “trickle down aid”, the UK government is looking to reduce poverty by funding luxury apartments and shopping malls.

This week, parliament has been debating a new bill that, in little more than a page, spells out a terrifying move towards the privatisation of aid.

The Commonwealth Development Corporation (CDC) Group is a government-owned company that uses aid money to invest in private enterprises in Africa and South Asia. And the CDC Bill, debated in Westminster this week, aims to channel more of the aid budget into it. Based on a market-knows-best approach to economic development, the CDC invests in business ventures in countries which it claims corporate investors might otherwise write off as too risky. The investments are supposed to meet the Department for International Development’s objective of helping to end global poverty.

But a briefing released yesterday by Global Justice Now shows that in reality the CDC has spent billions of pounds of tax payers’ money on schemes that have included upmarket shopping malls and luxury apartments in Kenya and private hospitals in India. While coverage in yesterday’s Times exposes CDC investing in restaurant chains in Vietnam and an advertising company in Ghana. The bizarre idea that these projects are the best way to tackle poverty is based on an outdated belief in the ‘trickle down’ effect which holds that as the rich get richer, wealth will eventually reach the poorest in society.

“the CDC has spent billions of pounds of tax payers’ money on schemes that have included upmarket shopping malls and luxury apartments”

Fighting poverty or funding big business?

One of the main ways the CDC justifies the company’s investments as poverty reduction is through the creation of jobs. Yet, according to a recent report from the National Audit office (NAO) up to 97% of the forecast job created were actually indirect, created as a knock-on effect, rather than directly as a result of their investment. The NAO report concluded that “this makes it difficult to determine how much credit can be claimed by CDC.”

To add insult to injury, the CDC pays itself handsome salaries, proving that poverty reduction can be a lucrative business for some. Its CEO salary last year was £300,000. 35 CDC employees earn more than the UK prime minister. In response to criticisms of their outlandish salaries, in recent years the company wrestled down their average pay packet from £123,000 to a hardly modest £90,000. But salaries look set to rise again in an upcoming remuneration review.

But what is more worrying is that despite these salaries, the CDC is unable to show how it has any meaningful impact on poverty reduction. On the launch of their report, the head of the NAO said  that it is a “significant challenge” for CDC “to demonstrate its ultimate objective of creating and making a lasting difference to people’s lives in some of the world’s poorest places.”

Putting the horse before the cart

In light of such serious doubts hanging over the impact of the CDC, you would expect DFID to undertake an urgent and serious review of its future relationship with the CDC. Instead, we’re seeing a proposed four-fold increase in its funding, and a ploy to increase that to a whopping £12billion at a later date.

What makes the timing of this bill particularly concerning is that the CDC has yet to deliver a strategic plan for investments beyond 2016. The NAO review into the corporation concluded that “a clearer picture of actual development impact” would be necessary to prove CDC’s work is worth the money being spent on it. And yet, the company has failed to set about even planning a method of evaluation of their investments and the impacts these have had on poorer countries. 

This means the bill being proposed effectively amounts to CDC being handed over a blank cheque worth billions, making a total mockery out of moves towards more transparency in aid spending.

A £12bn sleight of hand

If you’ve never heard of CDC, you wouldn’t be alone. Many MPs won’t even know this bill is going through parliament at the moment – it’s been rushed through, and played down by the government. That is why Global Justice Now has launched a campaign calling on everyone to email their MPs as a matter of urgency to ensure they oppose this bill.

The figure on the table is a cap of £6 billion to go to CDC from the aid budget, but it is proposed that this cap will increase to £12 billion at a later date without having to get MPs to vote again. To put that into context, £11.8 billion was the entire budget for DfID this year. So the equivalent of an entire year’s aid spending – money especially put aside for the UK to play its role in poverty reduction – could end up in the hands of this company.   

Considering the flaws in CDC’s track record, and the gaping holes in their plans from 2017, that’s not only a huge misuse of the department’s money, it amounts to an effective hijacking of the aid budget for private interests.

We must stop this bill.