Britain’s swelling overseas aid budget has created a new group of “poverty barons” paying themselves up to £2 million a year for their work helping the disadvantaged.
10:00PM BST 15 Sep 2012
The Department for International Development (DFID) paid almost £500million last year to consultants, mostly British, many of whom earn six, even seven-figure incomes, courtesy of the taxpayer.
DFID also funds dozens of foreign consultancy firms. It is paying £6million to the University of Cape Town to investigate mental health issues in southern Africa and millions of pounds to US-based organisations, including the Clinton Foundation, the International Food Policy Research Institute and Family Health Inter-national.
It is paying a Washington-based group, Search for Common Ground, £3.9million to “support the electoral cycle in Sierra Leone”. Consultancy firms in India and Uganda are also receiving large sums.
DFID spent more than £20million last year on hotels, including many five-star ones. Next month it will open a 40,000 sq ft Indian branch office in Delhi with 18 meeting rooms and 280 desks — even though the then International Development Secretary, Andrew Mitchell, said last year DFID would not be in India for “very much longer”. The furniture bill for the outpost comes to almost £400,000.
A Sunday Telegraph investigation shows just how lucrative the aid business can be for the private companies that dominate DFID’s roster.
The managing director of the London-based development consultancy Adam Smith International (ASI), which gets most of its income from DFID, paid himself a salary and dividends totalling almost £1.3million in 2010.
William Morrison earned £200,000 from ASI and collected dividends worth £1.06million from its parent company, Amphion Group, 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 ASI.
Mr Morrison’s salary rose by a quarter last year, to £253,000. He and the three fellow directors shared dividends of £7.5million, or almost £1.9million each, which they paid to Amphion Group.
The directors collected salaries averaging £125,000 each.
Adam Smith International — which grew out of, but is now not related to, the Right-wing think-tank, the Adam Smith Institute — was paid £37million by DFID last year to promote the free market in the Third World. Its total turnover that year was £53.6million, with profits of £5million, up 10 per cent on 2010.
Its work for DFID includes tax reform in Afghanistan, school capacity building in Pakistan and a market development programme in Nepal.
A director of ASI and Amphion, Peter Young, justified the payments, saying: “We have got tax revenues in Afghanistan up from next to nothing to £2billion. If you want to get a good job done, you have to get people who know what they’re doing. Our profit margins are on the low side for consultancies.”
Mr Young, who paid himself a dividend of £800,000 in 2010, said ASI employed “low hundreds” of staff on DFID contracts. Most earned between £300 and £850 a day.
He said: “If you hire a plumber in London, you’re going to be paying £1,000 a day, if not more.”
Not all the money paid by DFID stayed with ASI, Mr Young said. Much of it was passed to other suppliers.
Another development consultancy firm, Maxwell Stamp, was paid £16.4million by DFID last year for projects including community legal services in Bangladesh and opposing child marriage in Ethiopia. Its highest-paid director earned at least £326,000, double his salary the year before.
Dozens of other staff of development consultancies substantially funded by DFID pay themselves six-figure salaries. At Hertfordshire-based HTSPE, which got about a third of its turnover from DFID last year, the highest-paid director is on £144,000. The company earned £12.1million from DFID in 2010/11, and is currently involved in the department’s numerous programmes. It is also paid by DFID to run policy development for the governments of Malawi and Nigeria.
Options Consultancy Services, a subsidiary of the abortion rights charity Marie Stopes, runs projects for DFID in India, Africa and Nepal. Its turnover last year was £12.6million — about half of it from the British aid budget. Its highest-paid director earned £233,000.
Sussex-based Health Partners International collected £7million from DFID in 2010/11, more than half its turnover. Consultancy salaries are up to £133,500 a year.
At Oxford Policy Management, which runs DFID’s “oil sector transparency” initiative and several other programmes, the highest-paid director earned £125,000 last year, up 25 per cent in a year.
However, the company’s annual report warns that the Government has “initiated efficiency measures that may have an impact on the profitability of the work available”.
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.
While almost all other departments are cutting spending, ministers have committed to increases in DFID’s budget, which will rise by 35 per cent in real terms in the next three years, or more than £3billion a year.
Because it is cutting staff it is turning to consultants to deliver programmes, prompting concerns about value for money from MPs on the international development select committee.
“We question why the department was paying consultants large amounts of public money in fees for development work,” the MPs said earlier this year.
Jo Johnson, a Conservative MP on the public accounts committee, said DFID was having to “shovel money out of the door” to meet its spending target.
Matthew Sinclair, chief executive of the TaxPayers’ Alliance, said: “This is further evidence that the department is failing to ensure that taxpayers’ cash is being spent wisely. Ministers have insisted that they need more money to help the world’s poorest, but taxpayers will be appalled that hundreds of millions of pounds is being channelled to pricey consultancy firms.
“Spending these vast sums on consultants looks like a bad deal for the taxpayer.”
A DFID spokesman said: “Taxpayers rightly expect DFID to monitor development and humanitarian programmes. That can involve using expert organisations to help ensure delivery and close oversight of the effectiveness of aid projects on the ground, which can often take place in remote or rural areas.
“Those organisations have won contracts to work for DFID through a best value, competitive bid process.”