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
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What Jeremy Corbyn gets right about the single market

Technically, you can be outside the EU but inside the single market. Philosophically, you're still in the EU. 

I’ve been trying to work out what bothers me about the response to Jeremy Corbyn’s interview on the Andrew Marr programme.

What bothers me about Corbyn’s interview is obvious: the use of the phrase “wholesale importation” to describe people coming from Eastern Europe to the United Kingdom makes them sound like boxes of sugar rather than people. Adding to that, by suggesting that this “importation” had “destroy[ed] conditions”, rather than laying the blame on Britain’s under-enforced and under-regulated labour market, his words were more appropriate to a politician who believes that immigrants are objects to be scapegoated, not people to be served. (Though perhaps that is appropriate for the leader of the Labour Party if recent history is any guide.)

But I’m bothered, too, by the reaction to another part of his interview, in which the Labour leader said that Britain must leave the single market as it leaves the European Union. The response to this, which is technically correct, has been to attack Corbyn as Liechtenstein, Switzerland, Norway and Iceland are members of the single market but not the European Union.

In my view, leaving the single market will make Britain poorer in the short and long term, will immediately render much of Labour’s 2017 manifesto moot and will, in the long run, be a far bigger victory for right-wing politics than any mere election. Corbyn’s view, that the benefits of freeing a British government from the rules of the single market will outweigh the costs, doesn’t seem very likely to me. So why do I feel so uneasy about the claim that you can be a member of the single market and not the European Union?

I think it’s because the difficult truth is that these countries are, de facto, in the European Union in any meaningful sense. By any estimation, the three pillars of Britain’s “Out” vote were, firstly, control over Britain’s borders, aka the end of the free movement of people, secondly, more money for the public realm aka £350m a week for the NHS, and thirdly control over Britain’s own laws. It’s hard to see how, if the United Kingdom continues to be subject to the free movement of people, continues to pay large sums towards the European Union, and continues to have its laws set elsewhere, we have “honoured the referendum result”.

None of which changes my view that leaving the single market would be a catastrophe for the United Kingdom. But retaining Britain’s single market membership starts with making the argument for single market membership, not hiding behind rhetorical tricks about whether or not single market membership was on the ballot last June, when it quite clearly was. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.