Foreign aid fat cats face greater scrutiny

Published by The Mail on Sunday (8th November, 2015)

Ministers have ordered a crackdown on private firms making massive profits from Britain’s foreign-aid spending after their activities were exposed by The Mail on Sunday.

International Development Secretary Justine Greening summoned foreign-aid fat cats to a meeting last month at which they were told they faced greater scrutiny of spending, mark-ups and margins.

This followed a Mail on Sunday investigation revealing that a small group of ‘poverty barons’ had seen their profits and pay soar off the back of the £12 billion British aid splurge. It found the 11 biggest firms involved – six of them British – were handed almost half a billion pounds last year, double the sum given two years earlier despite Government pledges to control such spending.

Six-figure pay packages are commonplace at the firms, with some executives earning more than £250,000 a year while enjoying annual pay increases and huge dividends.

One firm doubled its administrative spending to more than £10 million a year, while others pay average annual salaries in excess of £50,000. There were allegations of some claiming for consultants costing up to £1,000 a day, then paying junior staff and outsiders less than they billed.

Now The Mail on Sunday has discovered that days after our investigation was published in May, officials at the Department for International Development (DFID) wrote to suppliers saying they intended to focus on issues such as ‘fair’ profits and the use of sub-contractors.

The letter warned of ’emerging heightened areas of public interest and political importance’. It said DFID might probe profits, tax payments and involvement in tax-avoidance schemes. The Mail on Sunday investigation found one firm doubled profits in a year but avoided paying any corporation tax.

‘As so often happens in government, there is a sense the wool is being pulled over your eyes by the private sector,’ said a senior DFID source. ‘There’s a lot of kicking ass going on now.’

The source said there was determination to challenge contractors being paid ‘astronomical rates’ for administrative jobs in London by demanding more details on fees and overheads.

Greening warned 95 firms attending the ‘Suppliers Conference’ on October 14 that they had to be accountable to taxpayers. Now they must provide ‘open book accounts’ disclosing full details of spending invoiced to the department, including all fees paid to sub-contractors and their mark-ups.

One of the whistleblowers behind The Mail on Sunday’s investigation said: ‘This sounds a brilliant idea but won’t be popular with the big firms putting on 50 per cent mark-ups.’

The department privately admits to failings across the industry and is concerned by the limited number of major contractors able to deliver aid. Despite austerity, the aid budget has soared to hit the United Nations target of giving away 0.7 per cent of national income.

A DFID spokesman insisted it had been strengthening accountability and spending controls over private contractors.

‘Three years ago we toughened our supplier rules with our first code of conduct, forcing companies to be more transparent and accountable while delivering £400 million of savings, and this will continue. Calling all major suppliers into the department last month was part of that ongoing process.’

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