Poverty barons cash in on British aid boom
Published by The Mail on Sunday (10th April, 2015)
Private firms handing out British aid in the poorest parts of the world are driving up profits, pay and dividends despite Government attempts to restrain them.
A small group of favoured contractors have seen turnovers soar and margins rise off the back of Britain’s aid boom – and now MPs are calling for an inquiry after a Mail on Sunday investigation discovered:
- Six-figure salaries are commonplace in the ‘poverty industry’, with big pay rises and basic salaries swelling to almost £300,000;
- One US-owned firm saw turnover and gross profits rise around fivefold in two years thanks to British contracts but avoids paying UK corporation tax;
- A British company saw its gross profit almost double in two years to £17.4 million, handing out six-figure dividends to directors on top of salaries of up to £239,617.
The revelations come six months after Ministers pledged to crack down on profiteering, urging aid ‘suppliers’ to be more accountable to taxpayers.
Tory MP Pauline Latham, a member of the International Development Select Committee, said: ‘This money is meant to help poor people abroad, not rich people at home.
‘The problem is that the aid budget has escalated since we enshrined the UN target in law and they have to spend the money. We need to look at this again.’
Leading contractors include DAI Europe, which earned 82 per cent of income from the Department for International Development (DFId) on projects such as assisting entrepreneurs in Palestine in 2014, the latest year for which it filed accounts.
These show that in two years turnover rose from £17.4 million to £84.7 million, partly through takeover of a rival ‘to increase access to European donor organisations’. Gross profits soared from £1.8 million to £10.5 million.
DAI’s ex-managing director Dr Julian Lob-Levyt, a former Dfid adviser, saw his salary go up from £248,125 to £294,193 over this period. Yet the company has not paid UK corporation tax for three years, blaming overall losses.
Its biggest British rival is Adam Smith International (ASI), which saw turnover from work such as ‘greening growth’ in East Africa and tax reform in Oman swell from £72 million to £111.7 million over the same period. Gross profits almost doubled from £9.2 million in 2012 to £17.4 million in 2014.
The company is ‘optimistic’ about future prospects, says its report – unsurprisingly, when Britain’s aid giveaway is due to rise from £12 billion this year to £16 billion in 2020.
ASI’s parent company shared almost £1 million pay among a small pool of directors, slightly less than last year but boosted by dividends of £440,885 paid to five of them. ASI pays its 105 employees an average salary of £69,425 a year, despite more than doubling staff numbers in two years.
A spokeswoman claimed much of the growth came from donors other than Dfid. She added that staff costs were high since they worked mainly in fragile countries and included provision of safe housing.
Options, a subsidiary of Marie Stopes International, saw turnover, profits, staff numbers and average pay all rise. Latest accounts disclosed total emoluments for directors rose from £138,488 in 2013 to £263,629 in 2014, ‘all… paid to one director’ in that year. A company statement said they paid staff ‘competitive’ rates.
Itad, which specialises in project evaluation, revealed rapid growth and admitted risk was reduced with the UN aid target now enshrined in law.
It reported turnover increasing 38 per cent to £8.78 million, net profit rising almost twice as fast to £1.35 million and dividends paid to shareholders up from £1.06 million to £1.43 million in just a year. The firm said it took ‘great care to ensure value for money’ in its operations.
Oxford Policy Management saw gross profit rise from £6.1 million in 2013 to £10.2 million in 2015. Post-tax profits rose to £1.4 million with boss Simon Hunt’s earning £156,566. A spokesman said that post-tax profits as a share of turnover fell and that they sought to deliver ‘best value for taxpayers’ money.’
Dfid claimed its procurement policies had saved £100 million over the past year. ‘It is right that we use specialist expertise to get the job done at the best value for taxpayers,’ a spokesman said.