Commonwealth Development Corporation Bill (First sitting)

Debate between Alison McGovern and Richard Graham

Committee Debate: 1st sitting: House of Commons
Tuesday 6th December 2016 Public Bill Committees

[Alison McGovern]

Q Very briefly, obviously there is a massive need for capital in Africa, and the question is how we should spend UK taxpayers’ money. I would like to come back to you, Tom. As we heard in the previous session, we are asking CDC to take increased risks with quite a lot of increased capital, but we do not yet have its strategy. Do you think that that approach is probably the wrong way round?

Tom McDonald: There is a cart-and-horse problem here, is there not? One of the things that we saw in the 2015 recapitalisation business case was that the Department did go through a thorough process of assessing, in collaboration with CDC, the art of the possible. There are good foundations on which the Department can build.

One of our worries, which we set out in the report, is that CDC has to be comfortable that it can absorb this money in two ways. One is internally: does it have the capacity to grow, still be agile and make decisions in the way it has done in the past? That is its internal operating model, if you like. The other is whether it has access to all the opportunities for investment. Now that it is again in the business of direct investment, that requires a lot more effort from the teams that are putting together these deals. There needs to be a discussion between the two bodies over the remainder of the spending review period, or the Parliament, about whether DFID is clear about what it wants from CDC, where it wants CDC to operate, and the principles on which it wants it to work. From CDC’s perspective, can it cope with the volume of money and can it, in good faith, invest all that in a portfolio of deals that will still allow it to meet its targets?

Gideon Rabinowitz: I have a very quick point to follow up on that. As well as our mission to tackle the injustice of poverty around the world, we are very keen in our work and our engagement with the development community to push for adequate public scrutiny and trust in the work that the British Government and institutions such as CDC do. We think that needs to be central to this debate, so these are really good issues that we are discussing. The absence of this investment strategy is making it a little difficult to get a fuller perspective. There is clearly a dynamic situation around CDC. I have looked at the business case for the last capitalisation last year, which said,

“CDC has previously determined that given investment needs, it could productively deploy up to £1bn of additional capital.”

We heard from this morning’s witnesses that that situation seems to have changed. An additional point was made in the business case that, of the £735 million that DFID allocated to CDC last year, it would need to go beyond that only in 2019. It is a very fluid situation, and the lack of clarity over that investment strategy and how the situation on the ground with CDC is changing poses challenges. It is important to get that clarity.

[Richard Graham]

Q A very quick question for you, Tom—probably a one-word answer. If I got you right earlier, you were calling for a more effective measurement of the quality of jobs generated by CDC. Do we have such a measurement in the UK?

Tom McDonald: A one-word answer would be no.