UK Parliament call for investigation of use of tax havens by development bank

A new report issued this morning by the UK government's International Development Committee has raised concerns about the manner in which CDC - the government-owned development bank formerly known as the Commonwealth Development Corporation- has been routing investments via tax havens, and has called on HM Treasury to investigate these practices. The report also calls on CDC to adopt best practice on tax matters.

The Committee, chaired by Malcolm Bruce MP (pictured), a member of the coalition government, has also said that CDC is not sufficiently focussed on poverty alleviation, does not focus its activities on priority sectors for poverty alleviation, and has been overpaying its senior staff. To make matters worse for CDC, which has been under intense scrutiny for many years by the redoubtable investigative team at Private Eye, the Committee also concludes that some of the investments made by CDC in recent years would have been made by private sector investors anyway.

According to Malcolm Bruce: "There has been a lot of fuss about the high salaries at the Government's development finance body, but CDC must do more to reduce poverty especially in the world's poorest countries."

"Over half of CDC's portfolio is in four 'middle-income' countries-India, China, South Africa and Nigeria." he said, "It should be working in poorer countries and with poor people such as farmers and small business owners and accept lower returns."

The Committee has suggested a radical solution by splitting CDC into two parts. Malcolm Bruce MP said: "The 'fund of funds' model is profit-making and leverages much extra finance. Therefore we suggest it is retained in the arm we suggest calling 'CDC Funds'."
"Some of the profits from this could fund a second arm called 'CDC Frontier' which would have a specific mandate to reduce poverty, and invest in pro-poor sectors including agriculture and infrastructure."

The Committee is pushing for greater oversight of CDC by DFID, so that there is greater alignment of poverty alleviation aims. It also said that current salaries are excessive at CDC, and that quality staff could be attracted for far lower salaries. Chair of the Committee, Malcolm Bruce MP, added: "DFID should be a more active shareholder in future. It should call CDC to account for excessive remuneration, and its lack of transparency."

The full report can be accessed here.