Minister rejects calls to rein in UK investment arm over spending

Calls for the United Kingdom’s controversial development investment arm to be put under tighter government control because of over spending and use of tax havens concerns have been rejected by a minister. At a parliamentary inquiry on Tuesday, British International Investment was criticized for funding fossil fuel projects and for investments in partnership with rich “elite” business leaders, often in middle-income countries, or funneled through Mauritius and the Cayman Islands. But Andrew Mitchell, the development minister, brushed off the criticism, arguing the U.K.’s development finance institution was the “best in the world” and should not be “interfered with.” BII — set up in 2022, with a new remit to help boost U.K. foreign policy — is fully owned by the Foreign, Commonwealth & Development Office, which appoints its chair and key directors and sets “strategic objectives,” but attends meetings only every quarter. Members of the Commons International Development Committee urged Mitchell to tighten oversight by appointing a full-time FCDO board member, such as himself. The move would allow the government to “raise an eyebrow” at questionable proposals before it was too late, Scottish National Party lawmaker Chris Law said during the inquiry. “These are political decisions that need to be made, before investments are made, by someone from the Foreign Office — such as yourself on the board,” Law argued. But Mitchell argued that having a Foreign Office official involved would lead to confusion, blur accountability lines, and “undermine and potentially destabilize the board and reduce its effectiveness. “Above all, I want the board to be independent from political pressure. The independence of BII’s board sends a very important signal to the market and to the private sector. “It reassures potential co-investors that BII conducts its activities in a commercial manner without political interference and will be a reliable and predictable long-term business partner,” he said. The committee is investigating criticism of a lack of transparency at BII, which replaced the longstanding CDC Group as part of then-Foreign Secretary Liz Truss’s strategy to draw recipient countries away from China and “towards free-market democracies.” BII is the largest part of British Investment Partnerships, which aims to mobilize up to £8 billion ($9.94 billion) of financing a year by 2025, including from the private sector. Its staff numbers have mushroomed from as few as 20, as the CDC Group was wound down, to 600 employees headed by a chief executive, Nick O’Donohoe, who was paid £343,000 in 2021. BII was alleged, last year, to be holding at least 20 investments in fossil fuel companies, two years after it pledged to stop backing greenhouse gas-producing energy. Sarah Champion, the committee’s chair, criticized BII “partnering up with very, very rich people at the beginning” when it should be putting money into new projects that then draw in further investors. The committee also pointed out that Mitchell’s objectives for BII — to invest “patient” capital, not seeking the highest returns, in the “hardest and most difficult places” — were not mentioned in its 2021 annual statement. But the minister argued against a “didactic” stance on fossil fuel energy and insisted using investment “vehicles” in tax havens did not result in “tax avoidance” in the countries where investments are made.