In a Commons debate on UK-based aid consultants, Labour MP Diane Abbott warned that there is a "growing phenomenon of wealthy UK-based management consultancies creaming off millions of pounds from the aid budget", and called for an increased use of consultants based where aid is spent instead.
The Department for International Development spent £500m on consultants last year, 90 per cent of which were based in the UK. Abbott, speaking at the debate on Tuesday, said that a failure to use the skills of contractors local to where aid is being spent, is providing a barrier to international development:
"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?" she questioned.
Responding to Abbott, the Under-Secretary of State for International Development, Lynne Featherstone, said that the use of UK-based contractors was a matter of "technical capacity".
"When UK firms win contracts from DFID it is because they have offered value-for-money solutions to the requirements of the contracts," she said.
"We encourage firms from developing countries to compete for DFID business. However, local markets often lack the capacity, especially for programmes where specialist skills and experience are required for maximum results. That is particularly relevant as we have increased our focus on working in fragile and conflict-afflicted states," she continued.
Contractors' salaries in the millions
But Abbott went further to criticise the UK firms directly, referring to the owners of some as 'Lords of Poverty'. Some directors of these organisations, she says, take home salaries and dividends in the millions. This works against the UK's commitment to increasing international aid, said Abbott. "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," she said.
Some of the UK-based consultants are contracted to assess aid applications. Abbott says that some of these 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".
One firm, Adam Smith Institute, was awarded £37m by DFID last year "to promote the free market in the third world". The company's total turnover for the year was £53.6m and the managing director paid himself dividends of £1.3m, said Abbott.
Details of DFID's contracting structure first came to light in a damning Sunday Telegraph report which highlighted many of Abbott's concerns and forced an investigation into DFID's use of contractors by the Independent Commission on Aid Impact. The report into that investigation is to be published in May 2013.
Measures already taken
Featherstone advised that the new Secretary of State for International Development, Justine Greening, who was appointed in September, has already introduced new controls that require DFID to seek ministerial approval before issuing contracts over £1m. In addition, "she is writing to our top suppliers to reinforce to them the importance of ensuring value for money in their work", Featherstone added.
"Our suppliers will have to show that they are not in it only for the money; we want evidence of their commitment to poverty reduction and to the cause of development assistance," she said.
