Overseas Aid (UK-based Consultants)

Debate between Tony Cunningham and Diane Abbott

Tuesday 20th November 2012 Westminster Hall

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

I want to draw the House’s attention to the growing phenomenon of wealthy UK-based management consultancies creaming off millions of pounds from the aid budget. We are seeing—the process has accelerated in recent years—the emergence of lords of poverty. People are building fat businesses and paying themselves fat salaries creamed from the budget of the Department for International Development. Lords of poverty, hardship tycoons, pinstriped famine magnates: whatever we call them, the phenomenon is growing, and I think the British public would deprecate it.

Let me say from the beginning that I support Britain’s commitment to raise its aid budget to UN levels. I congratulate the Government on their willingness to ring-fence their aid budget. We are talking about some of the poorest people in the world. Those who would cut our aid budget are not just wrong; they are not considering how, in the 21st century, we are all our brothers’ keepers. For a fraction of Britain’s gross domestic product, why would we not take steps through aid and trade to promote stability in other parts of the world? It is not just about standards of living, happiness and health; it is also fundamentally about global stability, and I believe that an aid budget, correctly used, has a big role to play in that.

Aid is not just about a glow of virtue for western Governments and taxpayers; it is about building a world that is safe for all of us. This month’s insurrection in the horn of Africa is next month’s terrorist attack in western Europe.

[Sir Tony Cunningham (Workington) (Lab)]

To add to the point that my hon. Friend is making, I wonder how many more entrepreneurs, researchers, top doctors, scientists and so on there would be if we lived in a fairer world.

[Ms Abbott]

My hon. Friend makes a good point. The world as a whole would benefit if it were fairer and if the energies and talents of more people in third-world countries were directed into education, science and entrepreneurship. Tragically, in some cases, they are being directed into piracy and the drug trade.

This country has a proud record on aid, both in personal donations by the British public and in successive British Governments’ commitment to aid. It is a known fact that the British public are among the most generous in the world when it comes to donating as individuals to disaster emergency appeals. It is also a fact that under different Governments—I want to be fair—we in this country have been fortunate to have some extraordinarily committed and charismatic Ministers for international development and aid. I am probably one of the few people in the Chamber who remembers Lynda Chalker, but anyone concerned with the future of Africa gives her a huge amount of credit for being prepared in both good and bad days to fight the corner for the importance of aid and of work with Africa. She played a crucial role in international development when I first entered the House.

There was also my colleague, Clare Short, of whom even her enemies would say that her finest hours were spent as Secretary of State for International Development. She did a huge amount, with an increased budget, to drive the Department forward. Nobody can deny her commitment and her energy. Members from both parties have done a huge amount, often in adverse political situations within their parties, to drive forward the international development agenda. I believe that when it is presented to the British public in the right way, they feel a lot of support for a properly deployed aid budget that genuinely benefits the people. The British public have shown in their response to disaster appeals that they want to help.

We in this country have a proud record on aid and international development. I welcome the fact that this Government have been prepared to stick to the UN targets for aid and to ring-fence the budget, but in recent years—I am not suggesting that the process began in 2010—more and more aid has been diverted to management consultants at the expense of practical projects that might be of benefit to some of the poorest people in the world.

I draw the House’s attention to a small British charity called Operation WellFound. WellFound requested £250,000—not much, as aid budgets go—to build wells and latrines for 60,000 people in Burkina Faso, one of the most impoverished nations on earth. WellFound put in a bid for funding to DFID, which then referred it to an organisation called Triple Line Consulting, a London-based company that advises on overseas aid, which examined it in detail. I will return to Triple Line Consulting. The application for just £250,000 was rejected in August.

WellFound—a tiny charity, but it does tremendous work—got an e-mail giving three reasons why it would not get the money. First, the bid was not considered sufficiently innovative. Digging wells may not be new, but there are millions of people all over the world for whom access to clean water is vital. One would think that the consultancy would have appreciated that. Just because something is not new does not mean that it is not relevant and important.

[Sir Tony Cunningham]

Does my hon. Friend also agree that clean water is the basis for almost everything else? Kids do not go to school if they are ill because they do not have clean water. It affects their health, education, time at work and so on. It affects everything. If people do not have clean water, everything else falls by the wayside.

[Ms Abbott]

Clean water may not be new or exciting, but it is the basis for many things. I have been fortunate to travel a bit around Africa—to Nigeria, Ghana and Uganda. Access to clean water is still a vital issue in such countries, yet that small charity had its application rejected.

Apart from the fact that the bid was not innovative, Triple Line Consulting went on to say that it did not explain how poverty would be alleviated. As my hon. Friend just said, access to clean water means so much to communities’ ability to move forward economically. The final reason why Triple Line was not prepared to approve the application was that poor WellFound did not provide evidence of how the work could be replicated on a larger scale. It seems to me that if one builds 25 wells, the way to replicate that is to build 50 and 75. I suspect that Triple Line just cut and pasted standard responses to that aid bid.

The decision came as a huge blow not just to the small team who run WellFound but to the villagers in Burkina Faso, where construction of the wells has had to be delayed. That experience, which is a microcosm of what seems to be going on in the world of international development, is far from unique.

The Sunday Telegraph, which I am not in the habit of quoting, did an analysis of DFID spending that showed that £29 million—take a deep breath—was paid in the past 12 months to Triple Line. It seems that the only thing that Triple Line triples is its own bottom line. Triple Line’s main contract and the bulk of its work is to assess applications for grants from DFID’s global poverty action fund. To be fair, the company passed on £27.1 million of this money to the aid providers that it vetted. However, it kept £1.9 million as a fee for its services. Had it been willing to shave a little bit off its fee, it could have handed the money to the little well project and the people of Burkina Faso could have had the wells.

The public will be baffled by DFID’s outsourcing assessing a bid for aid to one mega-consultancy and then outsourcing it again to a different consultancy, a specialist branch of the accountants, KPMG. In the past 12 months, DFID has paid KPMG more than £35 million. Of course, KPMG says that a lot of that is passed on to aid providers, and perhaps it kept back £3.5 million as a fee. That will reassure the people of Burkina Faso.

Triple Line is typical of the sort of company that has emerged in recent years and is one of the lords of poverty that I am talking about. Triple Line is based in Putney in the UK and is owned by two directors who founded it in 1999: Lydia Richardson, a socio-economist—I do not know what that is—who lives with her husband in a £1 million house in Wimbledon, and David Smith, an economist, who lives just a few streets away. Triple Line’s website says:

“We operate on the principles of openness, transparency, accountability and trust.”

However, it registers as a small company, meaning that it is not required to publish its accounts. That is how open, accountable and transparent it is. The owners refuse to disclose what their income or profits were last year or how much they were paid in salary or dividends. Apart from working with DFID, Triple Line lists 37 other clients on its website and states that its annual turnover is £2 million. So the £1.9 million it creams off DFID represents the major part of its turnover, which apparently it gets from cutting and pasting standard replies to small charities that want relatively small sums to do practical work.

That is just one company. It is important to look at the bigger picture. We know that last year alone DFID spent £500 million on consultants. The data compiled by a national newspaper show that the vast majority of those contracts are going to UK-based companies. The share going to UK firms has risen in recent years. I will return to the point about how desirable it is to give an increasing proportion of our aid budget to UK-based firms.

Of the 117 major DFID contracts and procurement agreements worth nearly £750 million, as published on the Government’s contracts portal since January 2011, only nine went to non-UK firms. Several of the best-paid consultants are former DFID officials, who appear to have gained substantial increases in their personal wealth since leaving the Department, even though they are still doing essentially the same work.

I am not the first person to notice this phenomenon. Earlier this year, a parliamentary report warned that the UK Government’s drive to cut costs could make them over-reliant on contractors—like Triple Line—and could even put the effectiveness of their aid programmes at risk. Members of the Select Committee on International Development said that their concerns about DFID’s use of contractors and other external partners were compounded by the lack of publicly available information on UK aid-funded contracts.

The Government have good intentions in seeking to maintain levels of and ring-fencing aid spending, but a public constituency for continuing high levels of aid cannot be built unless there is a measure of openness and transparency, which we have not seen to date.

The rise in the amount of money given to UK-based consultants is alarming, but before I speak a little bit more about that in general, let me mention another lord of poverty, creaming millions off the aid budget. Adam Smith International is the offspring of the think-tank, the Adam Smith Institute, which is probably better known to Government Members than to me. Adam Smith International has gone from strength to strength. It was paid a total of £37 million by DFID last year to promote the free market in the third world. Its total turnover that year was £53.6 million, with profits of £5 million, up 10% in 2010. Let us pause and think. We in this country, as a consequence of austerity, are seeing cuts in Government and at local government level. All hon. Members know that some measure of austerity would have had to happen, whoever was in government, but ordinary people are seeing cuts in their local government services and at Government level. Yet one of the lords of poverty is able to drive its profits up by 10% to £5 million.

It gets better. The managing director of Adam Smith International, which gets most of its money from DFID and therefore from the taxpayers—the same taxpayers who are seeing cuts to their local government services and cuts in Government—pays himself a salary with dividends that in 2010 totalled almost £1.3 million. The managing director of Adam Smith International trousers £1.3 million. Anything further removed from the public’s idea of the kind of people who go abroad to help some of the poorest people in other countries could not be imagined. I repeat that if we are going to build a constituency for continuing high levels of aid—in my view, it should increase—we have to examine this sort of abusive business activity, with people running what are supposed to be aid organisations and paying themselves salaries in the millions.

William Morrison, another member of Adam Smith International, earned £200,000 from that firm and collected dividends worth £1.06 million from its parent company, Amphion Group, which is wholly owned by him and three of his fellow directors. Amphion Group’s accounts state that its purpose is to act as a holding company for Adam Smith International. Mr Morrison’s salary rose by a quarter last year, to £253,000. He and his three fellow directors shared dividends of £7.5 million—almost £1.9 million each—which they paid to the Amphion Group. The directors collected salaries averaging £125,000 each. A director of Adam Smith International and Amphion, Peter Young, justified the payments, saying,

“If you want to get a good job done, you have to get people who know what they’re doing.”

With the greatest respect to Adam Smith International, I must say, as someone who has travelled in Africa and travelled extensively in the Caribbean, where my family originate that the idea that one cannot get the skills to improve and strengthen the government and economic structures of third-world countries without paying UK-based directors £125,000 each is risible. There are so many people of Nigerian, Afghan, Caribbean or horn of Africa origin with the skills, ability and talent, but they are unable to break into this sort of work because companies such as Adam Smith International have a death grip on it. They use the size of their organisations to squeeze out smaller and aspirant organisations.

[Sir Tony Cunningham]

Does my hon. Friend agree that if we use, for example, African consultants in Africa, not only do they have a better idea of what is happening on the ground but the money that they receive is spent in their own country, so we achieve a double benefit for the people who live there?

[Ms Abbott]

I am grateful to my hon. Friend for that point, which I was coming to. I am concerned about aid as a British parliamentarian, on behalf of the British taxpayer, and as someone with an interest in global realities and the important role that aid can play in creating global stability, and as one who one wants to help the poorest people in the world. I am also concerned about aid because, having personal contacts in some of the countries where it is dished out, I know that it causes huge frustration to see UK-based consultants flying out for a week or a month, staying in four-star hotels, going around in 4x4 vehicles, sending a few e-mails, writing reports that simply regurgitate known facts and then flying back to the UK, when there are local people who have a better understanding of the conditions. Whether it is in Afghanistan, west Africa, the Caribbean or the horn of Africa, local people could do those jobs just as well.

Furthermore, as my hon. Friend pointed out, if we employ locally based consultants, first, we help to build the knowledge base and infrastructure of those countries and, secondly, we pump money into their economies. If the only hope that people in third-world countries have when faced with those bloated UK consultancies is to get a job as a driver, a cook or a nanny, and if in the 21st century we are not prepared to start to shift funding to the skills and talent that we know exist in some of those countries, it is no wonder that the question of aid has become a talking point not only in the UK—often among people who are opposed to the principle of aid in the first place—but in Africa. How much good has that aid really done? Part of the reason people query how much aid we give to Africa and the third world—we can all see the statistics—is that they see that the money is paid to UK-based consultants and has a minimum practical effect in the local economies.

To return to the lords of poverty, there are dozens of staff in UK-based development consultancies—substantially funded by DFID—who pay themselves six-figure salaries. At Hertfordshire-based HTSPE, which got a third of its turnover from DFID last year, the highest paid director is on £144,000. The company earned £12.1 million in 2010-11 and is currently involved in the Department’s numerous programmes. GRM International received large sums of money from DFID but managed to pay only £47,000 in tax in Britain last year—possibly a debate for another time. GRM International was bought out by managers in 2009 and has since merged with another aid giant, Futures Group, and secured massive contracts from the US and Australian Governments. The firm was paid £67.7 million in management consultancy fees for aid delivery to the poorest communities in Zimbabwe in August 2011. Last year, the highest-paid director in Oxford Policy Management, which runs the DFID oil sector transparency initiative—I wonder if they have heard about that in the Nigerian delta—and several other programmes, earned £125,000, up 25% in a year.

No one says that people working for such companies should not get a living wage, to coin a phrase, or competitive rates. If we look at the absolute poverty in the countries that they are working in and recognise the possible effect on local economies if we were more willing to give money to local consultants, however, we have to query such massive salaries, profits and turnover, from DFID expenditure and with no real clarity about the outcomes.

The new Secretary of State for International Development has announced an inquiry into the use of such consultants, and we welcome that. Will the Minister tell us when to expect that inquiry to be completed and made available for public discussion? A review of Britain’s multilateral aid programmes, to assess the effectiveness of 43 aid organisations receiving UK money, was concluded to have contributed significantly to improving transparency and achieving value for money. The internal review of the Department’s spending on technical experts ought, therefore, to have similarly benign results, although when we want to review the use of consultants and technical experts we find ourselves in a hall of mirrors. The Independent Commission for Aid Impact, the UK aid watchdog, has also announced plans to examine DFID’s use of contractors, but those plans have stalled because many of the people involved are themselves big aid consultancy organisations.

There is immense good will in this country for the concept of giving money, whether from an individual’s pocket or from the Government, to help some of the poorest people in the world. That good will, however, is being strained by the rising amount that is going to British-based consultancies and by the difficulty of seeing their out-turn. I am concerned that, in DFID’s efforts to cut staff, it has outsourced work such as assessing aid bids that properly ought to rest within DFID and could certainly be done a lot cheaper in DFID, rather than by KPMG with its profit margins—nor is there any reason to think that an international accountancy company knows more about aid than people who have worked in DFID on the matter for all of their careers. Yes, we are on the right track with the overall sums of money, which it is important to ring-fence, but the trend, since 2010 in particular, has been to give the money to UK-based consultants.

When I refer to UK-based consultants, let me be clear that some are expert in house building or malaria nets, for example. One of the most successful pieces of aid to the Caribbean was when Metropolitan Police officers were seconded to the police in Jamaica. Jamaicans appreciated that, because the police brought real expertise and it was a real skills transfer operation. Frankly, it also enabled the politicians of the time to bypass some of the alleged corruption in the Jamaican police department. That aid was valued, so I am not saying that in all times and in all places there is locally based expertise that DFID should pay for. What I am saying is that generalised management consultancies, such as Adam Smith International, to name but one, send young people with no background in aid or development to Nigeria. They fly business class and stay in four-star hotels, earn considerable sums, and then fly back, while Nigeria continues much as before.

[Sir Tony Cunningham]

Is my hon. Friend suggesting that the transformation to a huge increase in consultants is ideologically based?

[Ms Abbott]

My hon. Friend makes an important point. I was anxious to strike a non-partisan note, so I avoided that subject. However, any objective observer who sees the money going to generalised management consultancies with no specialist knowledge of the practical aspects of aid might think that there was an ideological motivation. We are discussing some of the poorest people in the world, and it is wrong that mere ideology should mitigate using money in the fairest and most effective way.

We need to know when the internal inquiry is due to report. The Department for International Development must consider whether some of the simple work of assessing bids for aid—there is a habit of sending out expensive management consultants—could be done more cost-effectively in-house. I urge the Government to look at some of the margins and massive profits that some organisations are making—the salaries that bosses pay themselves, and the millions of pounds of turnover—from DFID money. They must examine whether some of those margins can be shaved. Everyone else is practising austerity, so why should the lord of poverty not do so? Why is it necessary to pay people hundreds of thousands of pounds to prevail upon them to take up work to help some of the poorest people in the world?

Above all, we must consider using more local experts and consultants. Everyone who is concerned about aid agrees that that provides better value for money, and the people involved understand local conditions and are in it for the long term. If I were a young man working for Adam Smith International, I might fly out to Nigeria for a couple of months, and in 12 months’ time I might be in Afghanistan or somewhere in eastern Europe. Would I have a long-term concern that people in Nigeria will be better off in the long run as a consequence of my activities? No, because I would get on a jet plane and leave it all behind. Local advisers, consultants and technical experts live in those countries and will do so for the foreseeable future, so they have a genuine interest, which UK-based consultants may not have, in ensuring that what they are doing will have a long-term effect and make their country a better place to live in.

Just this morning, we heard about the millions of pounds being spent on an education project in Nigeria. It sounds like an excellent project, but the report that was published this morning queries its effectiveness, and says that children leave the school without mastering basic educational skills. That brings the whole issue of aid and development into disrepute. In these times of austerity, British taxpayers are entitled to know that aid money is being well spent and not top-sliced by overpaid, UK-based management consultancies. The very poor people we want to help need to know that the UK Government are straining every sinew to ensure the best value for money from their expenditure.

I go to Jamaica most years, and apart from UK policemen on secondment, people there and in other Caribbean countries have no idea where aid money for the region goes to, because so much of it is spent on UK-based consultants who mix in an exclusive social circle in the capital. They train, and write reports and e-mails, but they do not interact with people.

Aid has a purpose, because in a 21st century global economy, I am my brother’s keeper. It has a purpose, because it is the right thing to do, and promotes global stability. The aid we give to countries such as Afghanistan and Palestine should build general relationships with this country. If it is trousered by UK-based consultants, and people in those countries do not see its practical benefits and believe that the only beneficiaries are those consultants who jet in and out, far from helping to build relationships, that aid raises a question mark at the very least.

For the whole time I have been a Member of Parliament, this country has had one of the best records for aid, including individual donations, of any country in Europe. It has had a great record under some Conservative Ministers and some Labour Ministers. We have every reason to be proud of that. The new phenomenon of increasing amounts of money going to UK-based management consultancies—some people say it is an ideological move, but I would not—far from building a constituency in this country for high and continuing levels of aid, bids fair to undermine it. We are a better country because we meet our commitments on aid. The very least the Government can do is to ensure transparency and accountability, and to assure the British public that they are receiving the maximum value for every penny of that aid.

In a world where small, vulnerable island states are buffeted by climate change, small countries in Africa are at the mercy of the commodities markets, and China, sometimes unscrupulously, is moving into areas where Britain was once the most influential foreign donor and partner, ensuring that our aid budget is spent effectively could not be more important. I urge the Government to examine the issues, and to introduce an internal inquiry, and I assure the Minister that I will return to the subject over the course of this Parliament.

[Sir Tony Cunningham (Workington) (Lab)]

Thank you, Mr Howarth for chairing the debate; it is a pleasure to serve under your chairmanship. I also thank my hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott) for introducing the subject and for the passion that she always brings to such debates. It is a pleasure to sit alongside her.

With our economy suffering, value for money has never been so important to taxpayers. Understandably, there was some confusion and great concern about the revelation that the Department for International Development had spent more than £500 million on UK consultants. It is hugely important to raise the issue here today.

I want to make a number of points about value for money, the use of the private sector and the use of UK companies, rather than companies from developing countries. Last March, the International Development Committee released its annual report. Even then, there were concerns about the effectiveness of aid and the possibility that it was being undermined by the use of UK consultants. In particular, the Chair of the Committee, the right hon. Member for Gordon (Sir Malcolm Bruce), highlighted plans to reduce DFID’s operating costs to 2% and cut administrative costs by a third, from £128 million to £94 million. Does the Minister believe those plans are hampering our aid programme? We understand that the measures have been implemented to reflect similar cuts at other Departments, but it is concerning that, although the Department’s budget is increasing, its capacity could be decreasing. We believe that that has led to an increase in the number of UK firms and consultancy agencies receiving money from the taxpayer.

I was not fully aware of all the figures my hon. Friend the Member for Hackney North and Stoke Newington referred to, but it seems that people are making salaries of £1 million and £1.5 million at the expense of some of the poorest people in the world.

[Ms Abbott]

The fact is that people who would regard themselves as middle income in the countries that these people are allegedly flying off to to help would not earn the sums we are talking about in a year. DFID should pause and think about whether it is right to drive a system that encourages people to cream off money in this way.

[Sir Tony Cunningham]

I totally agree. Does the Minister feel that that approach represents true value for money for the British taxpayer? Can she demonstrate that it is the most effective approach to reducing poverty? If DFID is about anything, it is about reducing poverty among some of the poorest people in the world.

The British public—my hon. Friend touched on this—are compassionate, caring and extremely generous, and we have only to witness some recent examples to see that that is true. I could cite Haiti, because of the disaster that struck it. It is not in the British Commonwealth, and it is not a country that DFID deals with; indeed, it was suggested that, because it was a French colony, France would lead the way in dealing with the disaster there. However, the British people showed huge generosity; they did not care whether Haiti was a French colony or a British colony—they cared for the people of Haiti and gave enormously generously.

It is vital that we can show people that their money is going to help millions of families—women and children around the world—and that it is not being wasted by large consultancies in the UK. In the light of that and the Department’s recent announcement that it will investigate where its money is spent, may I, in the spirit of transparency, pick up on my hon. Friend’s comments and ask the Minister yet again when the internal report will be published in full? Interestingly, I asked that question at DFID questions recently. The Secretary of State—I appreciate that she is new to her post—gave me the longest answer in the whole Question Time, but did she tell me when the report will be produced? No. We need to know when it will be produced and whether it will be produced in full. We have a right to know where the money is being spent.

I hope the Department will be open and transparent about how British taxpayers’ money is spent and where it is going. The Secretary of State is relatively new, but I hope she will get to grips—people keep using that term—with how money is being spent in her Department, because the £500 million given to UK consultants represents 8% of the DFID budget. We also hope that the report will shed light on other funding streams. What struck me about my hon. Friend’s comments was the fact that a small non-governmental organisation that was digging wells for poor people was refused £250,000 when we are spending 8% of the budget on consultants.

The coalition Government have sought a different style of development. I do not want to get into an ideological argument, but there seems to be an increased emphasis on the private sector and on a more—I choose my words carefully, and I should when I am looking at my hon. Friend—paternalistic approach to the way we deal with the developing world. That approach ideologically favours the private sector, and we have seen examples of that.

I am not saying that I am against the private sector, which is hugely important. Let me give one example. Recently, I was in Nairobi, and I went to look at private schools. Now, private schools in Nairobi are not like the private schools we would imagine in other parts of the world. Kibera is the largest slum in Nairobi—one slum, one million people. There are a handful of schools on the outskirts. If local people want their children to have an education, they have no choice but to pay a relatively small amount to allow their children to go to school. The amount they pay for their child to go to school for a month is the same as the cost of a bottle of beer in one of the top-class hotels in Nairobi that some of the consultants we are talking about might stay at. People do not have a choice about making such payments, but this is more a social enterprise than anything else, so I am not against everything that is private.

[Ms Abbott]

Does my hon. Friend agree that, although no one in the 21st century objects in principle to money going to the private sector, being spent in-house by the Government or being spent by aid organisations, the watchword has to be whether it is spent effectively? Is the maximum benefit going to the recipients of aid? We do not take a position as between private, public, Oxfam or whatever; the issue is effectiveness and whether we are helping the people we seek to help.