Penny Mordaunt mocked over private profits aid plan after government investment wing made £70m loss
Penny Mordaunt was left red-faced today after it emerged the Government investment arm she argued could save the taxpayer "millions" of pounds on the aid budget made a loss last year.
The International Development Secretary said in a speech this morning that profits from private government arm CDC should be counted in the 0.7% of GDP aid target - which would mean "reducing the ask on the public purse".
But it later emerged that CDC made a £72.8m loss last year and is expected to make further losses or small profits in the coming years.
Labour MP Lloyd Russell Moyle - who sits on the Commons International Development Select Committee - said the revelation showed the announcement was “complete rubbish”.
“I knew CDC was not expecting to turn a large profit in the next year or two - but that’s a significant loss,” he told PoliticsHome.
“Penny is saying they are going to count the profits and cut the Government spend - but if it makes losses the department will have to spend £73m more.
"It’s all a flag-waving exercise to Conservative members. All it does is undermine the concept of the 0.7% target."
He added: "Short term losses could mean that the CDC is acting more like a direct foreign investment than a private equity firm."
CDC made a profit of £230m a year on average in the past six years - but losses are expected in the coming years as it pulls out of more developed nations to invest in those that are less developed, the department admitted.
A DfID spokesman said: "Investing in the developing world is vital in the fight against extreme poverty and in no way undermines the 0.7% target.
"While CDC made a small loss last year, it still retains assets of £5.1bn. We are also injecting £3.5bn of new equity into CDC over the next five years to achieve an even greater impact."
The plan could also mean a cut in overall aid spending - as any profits currently serve as an extra boost to development cash since they are invested back into overseas projects on top of the 0.7% spend.
Shadow International Development Secretary Kate Osamor said: “This is an outrageous distortion of the country’s overseas development programme.
“Suggesting that global poverty can be turned into an investment opportunity proves the Tories have run out of serious ideas and can no longer be trusted with the aid budget.
“The Tories’ plans to rewrite the international rules on aid and slash billions of pounds of public money will do nothing to end global poverty or reduce inequality."
Meanwhile, Samantha Attridge, from the Overseas Development Institute thinktank, told PoliticsHome the plan would be “very controversial”.
She said: “It would represent a move towards the ‘part-privatisation’ of the funding of ODA.”
Mr Russell-Moyle said the plan was "just a way to get to 0.7% without the government having to spend the money. It's austerity being sold as compassion".
The Government will appeal to the OECD to change aid funding rules to allow the CDC profits to count towards the 0.7% target. It also wants to encourage private firms to invest more in developing countries.
Ms Mordaunt also said she wanted high street banks to offer customers the chance to invest in overseas aid - giving them the opportunity to profit from their charitable giving.
In her speech she said: “We remain committed to 0.7%. But as we do so we should ensure the British public get a triple return on their generosity and compassion.
“A personal return to them, a stronger Britain and a more prosperous and stable world. This is a once in a generation opportunity.”