The British government has been accused of undermining its own commitment to transparency on aid spending after it emerged that it plans a dramatic increase in the funding it channels through the controversial private sector arm of the UK’s aid programme.

A draft bill from the Department for International Development (DfID) proposes to increase the limit on official support given to the CDC, formerly the Commonwealth Development Corporation, from £1.5bn to £6bn – with further scope for the cap to be doubled.

At a time when the government has pledged to curb the use of tax havens and account for how aid is spent, the development prompted an outcry from opposition MPs and tax justice campaigners, who highlighted the CDC’s record of channelling investments through secretive offshore locations.

Critics also took aim at the CDC’s record of pouring funding into gated communities, shopping centres and luxury property in poor countries, claiming the bill signalled a highly “ideological” shift in direction for DfID, now headed by Priti Patel, who has been dogged by her past calls for the department to be scrapped.

Another area of criticism has centred on the remuneration of the CDC’s top earners. Its chief executive, Diana Noble, earned more than £300,000 in 2015.

Nick Dearden, the director of campaign group Global Justice Now, said: “From a luxury housing and shopping complex in Kenya, to gated communities in El Salvador, the CDC has an appalling record of funding developments in the global south that make a mockery of any notion of aid money going to help vulnerable communities that lack access to basic resources.



“This is evidence that DfID is increasingly committed to a highly financialised, highly unequal, highly ideological form of ‘development’ which helps big business and not ordinary people.”

The CDC’s accounts for 2015 showed it continued to hold significant investments in tax havens including the Cayman Islands, Mauritius and the Channel Islands. The investments often take the form of shares in partnerships in which the identity of other partners is not immediately clear.



Earlier this year, Prime Minister Theresa May ordered a crackdown on individuals’ and companies’ use of offshore tax havens – many sited in British overseas territories – as part of her stated aim of “reforming capitalism” after the BHS scandal.

“The CDC has a history of funding companies via tax havens and through private equity funds, where it can never be sure where the money will end up,” said Tim Jones, policy officer at the Jubilee Debt Campaign. “Public funds should be assisting impoverished countries getting back the tax money they need to reduce poverty and inequality. Expanding the CDC risks more public money being used to facilitate tax avoidance.”

Stephen Doughty, a Labour member of the Commons international development committee, said: “It is extraordinary that the government is seeking to massively increase its funding via an organisation that has previously been subject to allegations about the use of tax havens, and which continues to provide excessive pay packets for some of its directors, in excess of the salary of the prime minister.

“Priti Patel claims she wants more transparency and efficiency in our aid spending – yet appears content to shove massive chunks of taxpayers’ cash to unaccountable investors and other government departments that have fewer safeguards and checks than her very own department.”

A DfID spokesperson said: “This bill is an essential step that will ensure CDC can continue to make pioneering investments and, as the secretary of state has said, this will help to create more jobs and boost economic growth in Africa and south Asia so that people can lift themselves out of poverty and leave aid dependency behind.

“The level of financial support that can be provided to CDC was set 17 years ago and has now been reached. The limits set in the bill do not commit us to increases in financial support. We will only invest in CDC when it is needed to meet demand, achieve value for money, and continue delivering life-changing results and clear development impact.”

Shortly after taking office, Patel pledged to reform DfID, claiming that too much of Britain’s aid money was being wasted, stolen or spent on inappropriate projects.

A DfID spokesman also strongly pushed back against criticism by Labour of the move, accusing Doughty of engaging in “baseless scaremongering” about the potential future of the funding.

“CDC has been supported by Labour development secretaries and Conservative ones as it is a great British success story,” he added. “The capital limit increase is routine and does not reflect a change in policy about how UK aid delivers on its fantastic track record of fighting poverty.”