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06/12/2016

UK watchdog calls for clearer picture of how aid investments benefit the poor

Development Policy

UK watchdog calls for clearer picture of how aid investments benefit the poor

Flying in aid. A resusable parachute for dropping food parcels on display at the AidEx development fair in Brussels, November 2016.

[Matthew Tempest]

The private sector arm of the UK’s aid programme is failing to demonstrate adequately how its investments improve the lives of the world’s poorest, according to the state spending watchdog, even as the government plans to ramp up the funds it channels through the body.

Given proposals by the Department for International Development (DfID) to quadruple the limit on support it gives to the CDC Group from £1.5bn to £6bn, the National Audit Office (NAO) calls for “a clearer picture” of the body’s overseas development impact in order to demonstrate value for money.

The report finds that DfID has improved its oversight of the CDC, which it also commends for making improvements such as better cost control and corporate governance. But it concluded that development targets met by the body – which says that its investments helped to create more than one million direct and indirect jobs last year – measured their prospective rather than their actual impact.

“The Department for International Development has improved its oversight of CDC and has directed it to address many of the weaknesses previously identified by parliament,” said Amyas Morse, head of the NAO.

“It remains a significant challenge, however, 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.”

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The report comes on the eve of the second parliamentary reading of a bill to increase the cap on DfID funding for the CDC to as much as £12bn.

Officials at the CDC believe that criticism from the NAO does not reflect the work that it has done to measure, evaluate and demonstrate development impact.

“The NAO recognises in the report that development impact is hard to measure and we agree,” said a spokesperson.

“Investments are long term. Impacts take time to feed through, but CDC is unique globally in its commitment to track and report on total job impacts consistently and annually. CDC has developed a robust methodology to measure direct and indirect jobs supported and created, and has reported the results on a like for like basis in its last two annual reviews for 2014 and 2015.”

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However, critics of the CDC and DfID’s policy said that the potentially huge increase in the private sector arm’s funding was not justified.

Stephen Doughty, a Labour MP and member of the international development committee, said: “Despite improvements since its past controversies, there is no case made for a 10-fold increase in taxpayers’ money being pumped into this institution – diverting our aid into private equity funds, some of which allegedly flows through tax havens.”

Aisha Dodwell, a campaigner for the pressure group Global Justice Now, said that while the CDC might be good at returning on investments, it was falling well short of meeting basic development goals like supporting people to move out of poverty or providing access to basic public services such as education and healthcare.

The CDC has also been the focus of controversy in the past over its executives’ high pay packets. The NAO report finds that its employees’ average annual salary has reduced by 27% from £123,000 to £90,000 over the past five years.

That situation may be about to change, however. Both the CDC and DfID admit that recruitment and retention of staff remains a risk for the group, whose staffing levels have been increasing as it expands operations.

As a result, the department and the CDC expect to have drafted a revised remuneration framework and submitted it to ministers for approval by March, according to the NAO.

“The NAO itself identifies that CDC has ‘made important, positive changes’, exceeded its performance targets and highlights DfID’s strong oversight and role in directing CDC to address historic issues.”

She added that the bill was an “essential step” towards ensuring that the CDC can continue to make its investments and ensure value for money for UK taxpayers.