DFID squeezes £70m from the private sector

Actis Capital complains of "strong arm" tactics

The Department for International Development has sold its 40 per cent stake in the emerging markets investment company it set up in 2004, Actis Capital. In return, DFID is receiving $10m in cash and a large share of future profits, expected to be worth over $100m over the next ten years.

The company was spun out of the Commonwealth Development Corporation when its managers paid £373,000 for 60 per cent of the business. It has gone on to become one of the world's leading private-equity firms specialising in emerging markets, but in that time the revenue to the taxpayer for its minority share has been zero.

Despite the fact that DFID was supposed to receive 80 per cent of the company's profits, no payments were made, because the company had set up a charitable arm which reduced reported profits to zero. In 2011, Andrew Mitchell, the secretary of state for international development, told the Commons that he was "amazed and surprised at the way the management of Actis have so enthusiastically exploited the taxpayer's position."

What is fascinating about this sell-off is that Mitchell apparently decided that, since Actis' managers weren't playing fair, he wasn't going to either. The government's financial adviser suggested that its share in Actis was worth between $3m and nothing, yet they managed to get almost forty times that. The BBC's Robert Peston reports how:

It is understood that Mr Mitchell - a former banker at Lazard - threatened to use the government's residual shareholding to frustrate the smooth operation of the business. For example he has the right to veto the appointment of Actis's chair and one non-executive.

The government will have been emboldened by the political background of the Actis spin-off, since the Conservatives have always maintained that Gordon Brown privatised it for far below its fair value; yet from a party which is so often accused of using privatisation to give "hand-outs" to private-sector allies, it is rather refreshing to see genuine antagonism.

DFID secretary, Andrew Mitchell. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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What do Labour's lost voters make of the Labour leadership candidates?

What does Newsnight's focus group make of the Labour leadership candidates?

Tonight on Newsnight, an IpsosMori focus group of former Labour voters talks about the four Labour leadership candidates. What did they make of the four candidates?

On Andy Burnham:

“He’s the old guard, with Yvette Cooper”

“It’s the same message they were trying to portray right up to the election”​

“I thought that he acknowledged the fact that they didn’t say sorry during the time of the election, and how can you expect people to vote for you when you’re not actually acknowledging that you were part of the problem”​

“Strongish leader, and at least he’s acknowledging and saying let’s move on from here as opposed to wishy washy”

“I was surprised how long he’d been in politics if he was talking about Tony Blair years – he doesn’t look old enough”

On Jeremy Corbyn:

"“He’s the older guy with the grey hair who’s got all the policies straight out of the sixties and is a bit of a hippy as well is what he comes across as” 

“I agree with most of what he said, I must admit, but I don’t think as a country we can afford his principles”

“He was just going to be the opposite of Conservatives, but there might be policies on the Conservative side that, y’know, might be good policies”

“I’ve heard in the paper he’s the favourite to win the Labour leadership. Well, if that was him, then I won’t be voting for Labour, put it that way”

“I think he’s a very good politician but he’s unelectable as a Prime Minister”

On Yvette Cooper

“She sounds quite positive doesn’t she – for families and their everyday issues”

“Bedroom tax, working tax credits, mainly mum things as well”

“We had Margaret Thatcher obviously years ago, and then I’ve always thought about it being a man, I wanted a man, thinking they were stronger…  she was very strong and decisive as well”

“She was very clear – more so than the other guy [Burnham]”

“I think she’s trying to play down her economics background to sort of distance herself from her husband… I think she’s dumbing herself down”

On Liz Kendall

“None of it came from the heart”

“She just sounds like someone’s told her to say something, it’s not coming from the heart, she needs passion”

“Rather than saying what she’s going to do, she’s attacking”

“She reminded me of a headteacher when she was standing there, and she was quite boring. She just didn’t seem to have any sort of personality, and you can’t imagine her being a leader of a party”

“With Liz Kendall and Andy Burnham there’s a lot of rhetoric but there doesn’t seem to be a lot of direction behind what they’re saying. There seems to be a lot of words but no action.”

And, finally, a piece of advice for all four candidates, should they win the leadership election:

“Get down on your hands and knees and start praying”

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.