10/02/2017 Select Committees


Recorded coverage of the Public Accounts Committee's session on overseas investment, from Wednesday 8 February.

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Thank you very much. Ladies and gentlemen, welcome to the


Public Accounts Committee this Wednesday 8th February, 2017. We are


here today to look at the CDC, the Commonwealth development corporation


which is a body set up originally in 1948 to channel money into


investment in developing countries to help promote economic growth and


job creation and it is going through an interesting change right now,


going through the House is a bill that's going to change the structure


but particularly focus on increasing investment in line with an economic


strategy so there is an investment limit going up from 1. 5 billion


currently to 6 billion and potentially enables the House


through secondary legislation to increase that to ?12 billion. So it


is an interesting time of change. The report goes through some of that


with interesting graphs about the expansion of staff teams and the


cost of staff going up as a result, partly as a result of that. This is


a quadruple willing of taxpayers' money to be invested for overseas


development aid but a vehicle that's a sort of hybrid vehicle because it


gets direct taxpayers' money but operates in private sector terms


which is a sort of brief summary of how it works. I want to welcome our


witnesses and I wanted to ask some questions about St Helena airport


before the main session. This is from my left to right. Rachel


Turner, interim director general for economic development. Welcome I


think it's your first time in the committee. Yes. Welcome. We are a


friendly bunch, most of the time. If you answer our questions! Sir mark,


permanent Secretary at the Department for International


Development. Diane Nobel, the chief executive, but not for much longer s


that right? A few more months. Do you know who your successor is? We


will talk about that later. OK. And Graham Ridley the chair of the CDC.


Our hashtag for anyone following on social media is hashtag CDC. Before


we start on that, Sir Mark, I wanted to ask about St Helena, I understand


there was a key date yesterday for tenders coming in to provide


aircraft to the airport. What can you do, can you update us on


progress on whether flights will be able to land at the airport? Yes,


chair. There was a closing date submission of tenders. I can tell


you we have had a substantial number of responses. My commercial advisers


tell me I shouldn't tell you the precise number because it is a


commercial process ongoing. It remains the Government's plan to


move through the tender process and to start an air service to St Helena


in the way we discussed last time I was here later in the year. OK. Any


of these aircraft large or all smaller aircraft that were managing


to land successfully? There are some aircraft that are in the category


that I ran through when I was here with Richard Montgomerie last time.


We won't revisit that in this session. Thank you for the update. A


couple of questions. I met some people from St Helena yesterday,


they may have met you, as well, I don't know. But I am concerned


because we have seen all of this money go in and haven't yet got the


right solution in terms of the airport, I hope that will happen.


But these are really questions for CDC and I don't expect to you sign


your name in blood to anything right now but your mission is to secure


future sustainability and prosperity for some of the poorest countries in


sub Sahara Africa and Asia. St Helena is underdeveloped and is in a


sort of aspect where it can't really change without the airport and


without the investment. It hardly has any hotel beds, the bank is


capitalised at ?5 million. It is precisely the sort of thing one


might think where a multilateral financial institution like the EBRD


or CDC might come in over a long period of time perhaps with partners


to develop a corporation, particularly if the air solution


comes up, that would create the right conditions for a much more


sustainable long-term tourist industry with perhaps 1520,000


visitors, there is obviously a huge interest and a niche market for


that. Is this the sort of thing that CDC would seriously look at? You


described precisely what CDC does but the geographies that we invest


in are decided by our shareholder and we invest at the moment only in


Africa and south Asia wris where 80% of the world's poor live. So a


question of the shareholder changing its mind. You Getty point. I get


your point and indeed you will be aware that the Caribbean development


bank, for example, with help is interesting in overseas territories


now I need to check which of the development banks have a mandate for


exactly where St Helena is but I will take that away and have a look


at it and in respect of CDC as you will know the Secretary of State is


planning to agree with the board shortly the new strategy for CDC and


that does touch on the issue what of right geographical areas are. It


would be extraordinary if the British overseas territories, some


are which very poor, some have had governance problems, when I was


first elected to as an MP I was invited to the solicitor owemans and


it was cancelled a because it was too dangerous. If they were excluded


when other places were, even if they were roughly in the right


geographical area, would that not be strange? It's a matter for the


investment policy and they're reviewing the policy at the moment.


So I will take away the point and consult the Secretary of State.


There is an open invitation for you to lobby the Secretary of State. OK.


We are moving into our main session on CDC, particularly in light of the


bill going through parliament. I will pass over.


Thank you very much for being here. There are a number of questions I


want to ask relating to your strategy.


First, to Sir Mark, do you think there has been a big benefit moving


from a fund to fund strategy to more direct investments? Well, I think


probably the company will want to comment on that, as well. The then


Secretary of State in 2012 was very keen to do that in order to get CDC


back in the business of being able to invest directly in companies


where the company thought there was a good prospect for creating jobs


and adding to the tax base and making development impact and the


experience so far, it is early days in terms of the proven results, but


the experience so far has been very positive. Yes, we think it's a good


idea for CDC to have both the fund to funds vehicle and the direct


investments, equity and debt. Yes, we are happy with our mandate. We


think it gives us the full range of tools we need to achieve our mission


to create jobs especially in the poorest places. There are some great


things that funds, investing through funds can achieve. You are creating


a layer of investing infrastructure effectively that will last for


decades to come. And also you are - direct investing can be much more


precise in targeting investments that alleviate poverty. The


principle worry about this is you are moving from one set of


investment, your investment professional, I read, so you


understand that it is a very different thing to be a fund to


funds manager than to be a direct investor. So you need a different


skills set. How are you doing in expanding that particular skills


set? If I can refer colleagues to page... Yes, the report covered it


very well actually, that we have done a lot of work over the last


five years to establish effective will you new teams, there is a


figure that shows all the boxes of the teams in the colours. And so we


have put in place product teams so a direct equity team and sector teams


because you really need to understand the sectors that you are


investing. Now we are beginning to expand our geographic reach as well


to supplement this so that we can be really close to our portfolio


companies but you are right it's a different skill. Do you think it is


- I was looking at the compound growth rate, which I asked for


specifically. I notice that it is sort of fallen off. Take the last


four or five years, it is about 7. 7.5%. Whereas over 15 year period


it's 10%. Is that related to the fact that you are shifting your


focus? Do you mean the financial return is coming down? Yes, it is.


It is not so much because we are investing direct, it's because we


deliberately responded to the recommendations from this committee


and also the development committee and international development


committee in 2010 to push ourselves to make harders investments. You


will have seen the development impact grid in the NAO report and


that is that targets our tapes and pushes our teams to make investments


in the harder countries. You will have seen our portfolio is more


weighted to the harder bits so we think we are pushing our mission and


that we think over time will continue to bring the financial


return. If as you accept that the financial return is slightly


decreasing, and that's what the numbers suggest, the issue that I


would have is that how do you measure the development impact


because it seems looking at the report and looking at other things


that that's a difficult thing for you to get a handle on and you have


used different criteria. So we think we have extraordinary impact and we


think and we are demonstrating it, as well. So we want to try and


maximise the number of jobs that are created. We can now show the last


two years our portfolio companies created over a million jobs in each


of those two years. A million jobs in each of those two years. We want


to increase taxes paid. We can show that our portfolio companies paid


over $7 billion over the last three years into local Exchequers, we want


to power Africa. We can show that our power companies generated 56,000


gigawatt hours, which is enough to support 28 million people. And we


want to bring the private sector and other investors in alongside us and


we can show that last year 700 million extra capital came in


alongside our 3 punz million that we committed to funds. Forgive me,


these are fluent answers but if you look at figure 15 of the report on


page 34, it's not - the picture that you lucidly describe is not captured


in that figure because there are a number of criteria that you


discontinued for what reason, I am not sure why you would have done


that. It looks to me like you have been moving the goal posts slightly


in the sense that some of the criteria are no longer used or have


I got the wrong impression? It's a different picture. Again the NAO


report very clearly shows how much we have done and how much has


changed since 2011. So, where we invest, how we invest, what we


invest in and a lot of our processes and policies have changed, as well.


Every time we enhance what we do we add something new to the way that we


report. So the picture I want to paint is one of constant


improvement, not one of wanting to change goal posts. You will


understand if you alter the measure it is very difficult for committees


like us to track progress. You understand that problem? Of course.


But the main metrics that I described upfront, jobs created, tax


paid, capital crowded in, power generated, these are not measures


that are changing. We will report consistently on them year on year.


Can I ask about jobs created. You talk about a million from the


portfolio companies. Direct jobs is about 25,000, isn't it? Yes Seems a


big jump from 25,000 to a million. Can you talk through how you make


that, what measure you set in place and make sure you are not double


counting? Of course. So it follows accepted economic advice which is


when you look at the job effect of investing it falls into three


categories. Obviously the direct jobs, we all understand that. Then


there are indirect jobs generated through supply chains. Then there


are induced jobs which result of bringing more power or finance to a


country or a region that doesn't have enough of it.


Your right to say that the methodology we put in place a couple


of years ago, it is clear that the indirect jobs are much great and the


direct jobs are much smaller as the proportion of the whole. But I think


this is intuitive. As an example, we made an investment bringing


hydropower to eastern Congo, this is off grid, the first of this region


has had it, that we think will generate 250 direct jobs but it is


part of planned to bring 40,000 new jobs to the indirect effect...


Perhaps we can follow up on this but how do you measure your not double


counting? You're creating the energy which could potentially create


40,000 but other things which could contribute to this which you might


also be investing in. The design of the methodology was not ours. We


went out and find the best adviser to put it together and we are peer


reviewing that methodology at the moment. Like you, we want to be as


precise and accurate and honest about the impact we have. About this


development, we had slightly more problems on this than I think you're


answers may suggest. In 2008 there was an issue, was there not? This is


to Sir Mark. There were a number of things in two dozen eight. This was


a question that Mr Kaepernick Lakra bacon asked in 2008. Why was the tax


paid by the date the company? Asking about the development company. There


are none of damage and need element impact. Are these businesses are


generating business and paying tax going back into the Exchequer? A big


change in the element impact has been the eight fold increase in


businesses paying tax. It is absolutely the case today that in


2008 we were not tracking jobs created. It is also the case as the


report pointed out that we were not in 2008 identified at the moment is


the company was going to make an investment or not, will be predicted


development impact would be. Those three things are enhancements. The


report recommends we do more to enhance knowledge of the element


impact, more evaluation work and so, and we agree with that I want to do


that. There has been a lot progress since 2008. Can I ask you a specific


question about this? By understanding is you had ?5 million


of the 735 that you got in 2015, ?5 million allocated specifically to


hire a senior evaluation Officer, or someone who would be looking at this


very issue impact, development impact. Where have you got to


intensify ring this person? The 5 million was not to hire the


individual, to be clear. We were in the -- we were intended to hire an


individual who had expertise in this and would be able to manage a 15


year long study, checking in periodically to provide the


aggregate picture of the element impact. I'm sorry to have to report


to you, at the report says that we have not been able to find the


person with the right skills to do that. What we have done is tender


contract to provide the analysis in the study over that 15 year period.


That is not the only thing we have done, we have also, the company


should be to much bigger programme of work they have commissioned of an


evaluative sword so we can tell a stronger story as we go along. Are


you still looking for someone or had you abandon that? We will have


another look at what I didn't want to do is delay the whole evaluative


process because we were delaying finding the senior person for that


we can let the contract and we have competent people. How long did you


spend trying to define this person? Are you so. -- a year or so. The


other thing I wanted to ask about is the quality of jobs because clearly


that is a big issue you pride yourself on in terms of job


creation. How do you measure the quality of the jobs you create? The


NAO report recognises that we made a lot of progress in this area. And we


agreed that it is not enough just to care about the number of jobs


created, we should also care about the quality of those jobs, or decent


work if you like. The things we have done, we have a code of responsible


investing and that had standards in it that followed the International


Labour organisation. It is very clear that we have standards set to


avoid forced child labour or discrimination, we ensure safe and


healthy working environments, and we ensure that our companies pay the


minimum wage. It is fine to say these are standard but the important


thing is are they actually did too? We have a great team that goes in


and does due diligence before we invest and assess the compliance and


if they are not complained they will put in place and action plan and


they oversee real change. We don't stop there, we also assess how the


companies are doing against the action plan and we will step in and


help them if they are falling short. We had a traffic light system that


go to the risk committee. If I may, it's a very compelling story, but


I'm interested in your relation to the private sector. This is quite


hybrid beast and I'm sure you would have been happy to receive capital


underwritten by the taxpayer, I've looked at York account and there no


cost of capital that I can see and yet you're competing on favourable


terms on financing with the private sector -- your accounts. Is that


something you are happy doing? Do you feel that you're competing not


competing but operating in a fair environment with other people you


are trying to do it on a commercial basis? CDC is a unique and


extraordinary organisation. What you describe is actually its strength.


It has permission to go to the very hard places that it uses and this is


a strength of the team we have hired, it uses commercial skills to


apply judgment to navigate the difficult places. The judgment about


which team we should work with which management team we should not work


with, what standards should we have in job quality and is this a company


that is going to grow and be sustainable for the long term? These


are important judgment that the team makes and these are commercial


skills. But you see there may be an issue in terms of private investors


operating in your space who feel they cannot compete and are being


crowded out. This is an important topic. We use the phrase


additionality. The meaning of that is that we always want to be clear


that CDC is bringing something that CDC is bringing something


unique to the investment we make and that can be capital. For example,


during the Ebola crisis we provided much-needed liquidity to companies


that were running out of working capital to the essential businesses


going. No other investor was investing in cereal own at the time.


That occur in Sierra Leone. Also we can bring things that the private


sector would not bring -- in Sierra Leone. We have dramatically improved


working conditions in a rail freight business intimately poorest state of


India, which is an industry which is notorious for poor working practice.


Or we may change the strategy of the investment that we work with. The


report talks about global leg, our busiest investment, which is the


biggest independent power producer in Africa. We make that investment


but commercial capital would have invested in it. It is an attractive


company. But what we have done is completely change the strategy from


essentially a commercial strategy where the shareholders are taking


out dividends each year and saying that we want those dividends and all


the focus to go on developing the next generation of power plants


across Africa which is not a fully commercial strategy. We have changed


the board and the management team and the strategy. For my


clarification, do you essentially go in as yourself or do you go in as


joint ventures? Do you have a style or approach with respect to joint


ventures and partners? We are very flexible. We can be very active, as


I described with Globalec, we were a majority shareholder. One of the


important things we do is to try to work with the best people. The magic


of CDC is when you combine capital with people who share your values


and what to do the right thing. One of the most important things we do


is to try to choose those people and back them. You don't see any


tension, any tension at all between those twin goals? You think this is


a model that is completely without any wrinkles? Of course it's


challenging. To the mandate we have, and the whole team that we've hired


over the last five years, completely accept this, is to really push the


impact part of our mission, to do the hard things that the committee


wants us to do. But to do it in a responsible way that generates


returns, crowds in the private sector as well, and also had a


demonstration effect so future investors will follow us. It is a


hard mission and it does have challenges and trade-offs, should we


make this investment, will it achieve both those aims? Mr Wrigley?


You summarised the balancing of the impact and the return. It is


perpetual paranoia, are we getting the right balance? You can think


about it on an investment level and a strategic level. Every investment


comes to the investment committee, the teams and the committee has to


make a judgment, a triangulation between the redevelopment impact,


how can we make the world better, financial return, how we're to


achieve our financial mandate from the UK taxpayer, are we going to be


additional? Your question, we never want to crowd out and we don't crowd


out and we have clear rules and guidelines. And are we managing UK


money with full business integrity? That is every investment. Last year


we made over 40 investments. At a strategic level, and we are very


long-term business, we have to judge development impact and financial


return, the tone of the National Audit Office inquiry eight years ago


was a different set of questions. That is what we try to do. Those are


the debate we are having at the moment with each shareholder for the


next five years. I looked at the 2008 report and clearly there were


big problems and it's a different picture. They were running it like


hedge funds with 30% returns one year on taxpayer money and were


being very well paid for it. You have moved on from that. I think, as


the NAO report said, the returns that we've made and the taxpayer has


made in the last five years, 84% of them came from that strategy and a


lot of great mobilisation was done in that period. And the Joslin


report from Harvard business School talked about 345,000 jobs created.


What was the fall in 2008? You have been saying how wonderful it was but


it was down 36% in one year? It was a volatile market. I'm talking about


over the period. I remember this, I was on the committee at the time and


one of your predecessors paid himself ?970,000 and was targeting a


bunch of middle income countries, not the most difficult to help so


they were mimicking what was being done by a private equity providers


and hedge funds and very nice for them, thank you very much, but not


clear that Mr and Mrs taxpayer need to be involved. And Sir Mark is


nodding. The reason you sort the drop wasn't because it was volatile,


although of course it was, but because there was a strategic choice


made, a good one. I'm not speaking out of turn, I hope, that an


accurate description? I think the change has been profound. The new


strategy that started in 2012 is a fundamental change and we have now


targeted, as it says on figure for on page 20, sub Saharan Africa and


South Asia, the poorest states, so we have 90% of our new investment...


Do you know how close signalling is to sub-Saharan Africa? As Mark said


earlier... -- how close St Helena. As the NAO report said, we have


fundamentally addressed the concerns of Parliament about that period.


Figure seven on page 24 of the report demonstrates the rate of


return and the 36% drop in 2008. In a sense there is another


objective, which is rather bizarre at first which is actually Sir


Mark's, if you like, objective, which is to spend a minimum of,


which is the most bizarre, if you like, way of looking at this, as


against clearly the more commercial objectives of trying to develop


projects which will give you development improvement in some of


these countries as well as a return on the investment made. So,


presumably each of these projects has a different development value so


to speak. So, Sir Mark, how do you make sure in your quest to make sure


you spend all that money we aren't actually spending on projects which


in the real world if we didn't have that target we wouldn't because it


is not good value or a good rate of return for the taxpayers of the


country because I am assuming there are some things which have a big


impact fairly quickly, you have picked infrastructure targets, I


suspect, because they're much better at doing that and the long-term


sustainable advantages is clearly demonstrated, but are you going to


be pushing now into territories which don't give you that sort of


return and how are you dealing with that? So, obviously I think you are


which is what the Government's which is what the Government's


decided and parliament sort of put on statute book for the tax payer to


spend every year on official development assistance. From that


budget the Government has a choice about how much to capitalise CDC and


the legislation which the chair referred to at the beginning which I


think is going through the House of Lords process tomorrow, gives the


Government the authority to invest with a statutory instrument on the


way up to another ?10. 5 billion into CDC. Now the previous


legislation which I think was passed in 99 or 2,000 capped what the


Government could put in. The capitalisation of CDC over the last


70 years has been here and there from the taxpayer, grown over time,


sometimes coming down a bit as MrBacon observed in a bad year, but


grown over time. The choice we face now is given that we had exhausted


the ability to capitalise previously permitted by legislation, assuming


the bill goes on the statue book, the choice that will be available to


ministers will be whether to put more capital into CDC and ministers


are absolutely clear during the House of Commons passage of the bill


that they would only do that on the basis of a clear business case where


it was absolutely transparent what the development impact would be,


what the trade-offs would be, whether there was a need for capital


or not. Now currently over the last two years what's happened in 2015


the company made commitments of ?735 million and in 2016 of ?1. 2


billion. Even in those African south Asian markets which have been


traditionally harder, and obviously the Government wouldn't have tabled


the bill if it didn't think there was a good case at some point in the


future for more investment, but that decision on more investment hasn't


been made yet. It will be subject to a business case. The quality of the


business case will need to be as good as the last one by the NAO


commented on, they say in the report it was a convincing business case


last time and then if there is a convincing business case ministers


will decide whether they do want to invest more. How do you measure the


value? The reason I ask that and you will no doubt say it is about the


number of jobs created and something other things you talked about, but


in a sense that's easier with an infrastructure project than it would


be than some of the things you are likely to be going into if they do


grant you the money, so are you considering reviewing your whole


measurement system so it is fit for purpose, that it is comparable


against different types of investment you make because it seems


that's quite important because the British taxpayer wants to see that


it is a philantropic approach has delivered and you can see which


investments have delivered more across the different measures? You


describe almost perfectly what you will see in our next five-year


strategy. So we want to be relentless about showing more, as I


said upfront we show a lot of impact but there is always more you can do.


So you will see in the strategy that we will be much clearer about the


individual impact that we want to achieve on each case, on each


investment that we make and you're right, it's different for each


investment. Obviously jobs and taxes are a unifying force and that's


where we started because we wanted to be able to show the impact of our


whole portfolio. Now we need to drill in a bit more and look at the


individual very much that is we make, what our expectations are,


what we want that investment to do over time and we need to track it


over time to see how we are doing. And will you look at that in the


context of the poverty gap or poverty need the country that you


decided to invest in, because you have picked projects presumably


according to some crit year because you think you can make the most


impact so to speak, but then do you go back to this country rather than


just this project, how do you actually improve the overall quality


of life there? What you see in the grid that we use and that really


does it in a way in that it grades higher the poorer and the harder


places to do business and the places that have the greatest need of our


capital. But always when we assess an individual investment we do try


and step back and say is this good for the country, is this good for


poverty, is this good also, does it ling us to the sustainable


development goals which obviously we are all unified in trying to


achieve. Measurement.


You are acutely aware from the answers that you have given of the


need to measure and I know we don't yet have the individual in place, if


we ever do, to look at this in the longer term, but pending that


individual being in place it seems to me there is a need to ensure that


you do take some action to make sure that what you think is happening is


happening and is delivering what you need, so it would be helpful to have


some spotlight on that as to how you go about it, and September this if


you like, fix, that we hope you find and one specific issue I would like


to address is one of corruption. Clearly you say that you look at the


quality of the directors so they are not corrupt, which is clearly the


right thing to do, but in many of these countries it is not just about


whether the director is or is not corrupt, but there are business


processes and business models which are simply not free of corruption so


how do you deal with that because clearly one of the things that we


face as politicians is a cry from the taxpayers say why are we


spending money on this and that the country is wealthy or, you know,


this is a project which could have been funded via the private sector?


Yes, so we take all possible steps to try and ensure that we and our


companies that we invest in avoid fraud and corruption and this


requires a number of different work streams effectively. So, we inor


dinnate efforts to make sure we work with the right people, that's really


at the heart of of it. We try to avoid sectors that have particular


propensity for corruption, ones with high levels of Government tendering


and things like that. We have a very strong business integrity team which


you will have seen from the report we built from scratch since 2011.


That team is as large as the IFC's, which is the private sector on the


World Bank, it has a portfolio of 15 times our size and our team is the


real size and these are real professionals. And obviously we have


lots of policies here. But again this isn't just about writing things


on pieces of paper. As the report points out, 19% of our pipeline was


turned down because we didn't meet the standards of integrity, either


the people working with or the standards we found in the companies,


or because of environmental and social issues. So, we are really


careful about where we invest. Thank you.


One of the things that is a bit of a riddle to me is the nature of the


relationship you have with DIDOD. These are obviously huge amounts of


money, the bill going through parliament is potentially giving


more. I want to know more about the relationship between DIFOD


ultimately responsible for the taxpayers money and the capable


investment professionals. Well, as the report says, there has been some


sort of revamping of the Government's arrangements and the


report says we have a thorough set of arrangements. The basic construct


is that the shareholder appoints the chair and sets the strategy and


investment policy and then it is a matter for the chair to assemble a


board on which she consults as new vacancies arise and to hire and


supervise the executive, to execute the policy. So the construct is that


there is a separation. As you will know, some of the low points in


CDC's history over 70 years have been ones where civil servants,


often well-meaning, came up with bright ideas on things that maybe


the company could do and poor decisions all too often were made as


a result. There is a deliberate separation. The report flags the


point that it is important everybody across Government understands that


separation and we have just sent guidance out to the whole of the HMG


network overseas to explain it is up to CDC, who are accountable through


the board to the shareholder and the Secretary of State, to decide what


investments to make. It is not up to, you know, the - not the civil


servants in my department or other departments. Clearly we don't want


to go down to the schemes and that kind of stuff. Are there formal


structures where DIFD communicate with CDC? Informal thing? There is a


set in the report. As Mark said, I have a team of six who help Mark


steward our relationship with the company. We have a formal process,


four times a year to sit down with CDC, to go through a series of


indicators about the portfolio, about the processes that Diane was


talking about in terms of due diligence and the environmental and


social plans and status of the underlying investments, it's a


detailed set of information that we sit down, drill through it. So we


feel that we are a very active and engaged and well-informed and we are


able to debate, we are able to ask questions and that's at the core of


our relationship, our ongoing relationship. And do you have a


power of veto in terms of schemes that you feel are perhaps unethical


or perhaps you feel that you don't wish taxpayers' money to be bound up


in this way? What we have is a policy and the deal is the company


are accountable for living within the policy. So in extremely rare


circumstances there's been one case mentioned in the report the company


brought an investment to us and asked us if we had a point of view,


but that was not to get a decision from us. What was your point of view


in that case was favourable? Had your point of view been, we are not


happy, then what would happen? I don't know, maybe the chair could


say what he would do. Graham Wrigley, what would have happened if


they had said we are not sure or just no? The way the board and I


feel accountable for is to deliver value for our shareholder and that


means development impact, a steady increase in the balance sheet CDC so


it's an evergreen facility that the UK Government can reuse and managing


reputation. And all the issues that are laid out clearly in the code of


responsible investment and the investment policy. And we explicitly


through formal structures supplemented through informal


conversations make sure we try and don't put our selves in that


position and we haven't done. Had you been in that position what would


you have done as a board? This is an informal relationship but it's


important because in the end the money comes from DIFD. Taxpayers


must be clear. So we would not do something that we felt that was not


going to achieve those goals. But in terms of the investment


decision-making itself... I need to publish you, it could be something


would achieve those goals but would be something that DIFD didn't like.


If it was, we are talking hypothetical, if it was something


that was so obviously wrong it wouldn't get through our processes.


If it was, coming up with an investment decision as I said


earlier, is a triangulation of those different things. It's a judgment


call you have to make at the end of the day.


I have to questions. When things go well and things have been success.


That's fine, but if things go horribly wrong, and there is a big


investment like in 2008, resume and you are ultimately responsible for


that? Me and the board are responsible, yes. You would take a


full response ability, it has nothing to do with DfID. The


strategy and objectives are set by the shareholder and our job as a


board is to execute and deliver the strategy. But an ordinary


shareholders would be able to get rid of you at some point? And they


can. I went through a review for my reappointment last year, there was a


thorough review. I get reviewed by the senior independent director


every year, the shareholder comments on my performance. As Mark and


Rachel said, we feel accountable to our shareholder. My last question,


and Diana answered but I want to what Sir Mark and Graham had to say


about it. Let's say a member of the public would say, I don't get this,


why not bring it all in-house and we have no problem with the


accountability? Or spin it off? But I can't understand, hypothetically.


It is an absolutely key question, why not bring it in-house? Because


civil servants in my department do not have the skills to run the


investments. We are an excellent department in the grant giving thing


we do. You're good at signing cheques. The supervision and


implementation and the result and all that but it does not involve the


management of the balance sheet. That is why not bring it in-house.


And I think the report does a good job of justifying that. Why not sell


it off? Another good question and the answer is because the public


policy rationale for the taxpayer owning this operation is because it


is a very good way of promoting development in Africa and South Asia


which find it hard at the moment contract -- attract investment. It


is about a million jobs a year, two and a half, $3 billion in tax,


demonstrating a new development path and the goal obviously if at some


point, just as in East Asia and Latin America, the markets we are in


now are open and attractive to pure private investment and there is no


longer a need for CDC. That is the goal. Let's put this on record. CDC


isn't actually a big part of your overall spend at a department. It


has a 4 billion balance sheet whereas you are spending 12, 13


billion a year. 10 billion. Of course, for 25 years up till the


year before last there was no investment in CDC from the


department's budget. Over the last two years, we have put in ?730


million and we are considering putting in more. That is because we


think the CDC, as the secretary district set out in the economic


element strategy, if the key vehicle in the British do much to promote


private investment in the poorest and most fragile countries, which we


think is the best way of creating good quality jobs and contributing


to the taxpayers. That is the rationale. Thank you, Mr Kwarteng. I


want to welcome some members of the Uganda bureau of statistics who are


attending the session today and you are very welcome. You're helping to


aid the bureau in their work. Mr Boswell. Following on from Mr


Kwarteng's light of questioning, a different


the -- it is not received intimation and above the CDC's decisions to


invest however the Department government arrangements encourage


CDC to share information in certain circumstances. Under what


circumstances does DfID encourage the CDC to share information about


investment decisions? It is really in the example that is covered in


the report. It was a very big investment for CDC to take its stake


in Kwarteng which is the biggest green feed that McCoy greenfield


power generation in Africa, burgers and on low carbon technologies, gas


and renewables. Because it was a big investment, the chair at the right


thing to do was to check if the department had a point of view about


it and it is the only case I'm aware of since 2012 where the chair want


to do that. We're not going to set criteria which tells the chair when


to make what judgment. We have appointed him because we trust him


to note the cases when he wants to prefer things to us. And from the


CDC side, dreich does not receive information on all of this integrity


issues that CDC encounters in its investments. So why does CDC in a


put in some business integrity issues encounters to DfID? We do


share all the serious ones. You deem them to be serious and then...?


That's right. There are sometimes details of those that we have to


keep confidential customer for example, the whistle-blower policy


protect the identity of the whistle-blower. And how does the CDC


determine which is this integrity issues are reported to DfID, which


really is what you just said, you deem it serious so what is the


criteria you use? Is there a process? It about yourselves? We


have ahead of business integrity who is a very experienced crime


prevention officer and also experienced in the private sector as


well. And he applied his judgment but according to some reasonably


clear principles. The areas we really need to share with DfID are


ones where either CDC ourselves or the companies we have invested in or


the fund managers we have supported have perpetrated some level of


crime, or where a crime has been alleged, I should say, against CDC.


That is where we focus. We will move on to indications of increased


funding I think. Mr Bacon? Can I stop the ?735 million? Can you


reiterate or summarise the rationale with it being that amount -- can I


start? It was only in July 2015 am not that long ago. Of course that


was the limit because that was the limit of the statutory provision of


that time. Why was it as much as that? It was basically because the


business case demonstrated convincingly as the report says that


there were lots of uses for more capital than the CDC had. That has


been corroborated because in the last two years, there was 730


million of new investments in 2015 and 1.2 billion in 2016 so what has


happened, even the toughest market in Africa and South Asia, the


business climate has got a bit better so there are more investable


propositions. CDC is by far the most concentrated of any organisation


that sort in Africa. There is 40% of its business in Africa compared to


10% for the International Finance Corporation but it is still smaller


than I see in Africa so there is a lot of need for capital to help


generate that number -- smaller than IFC. Years ago I used to act for a


big private equity investor so I was always putting out statements to the


press about when they bought or sold investment and it became apparent


that there came a point when there was plenty of money out there, I


guess this was the late 90s and I know it goes in cycles, and not


enough good investment propositions enough good investment propositions


so you would have more money chasing those good propositions. That is a


universal, a phenomenon of investment, not particular to or


Africa or a category. But I attended a dinner recently where some Kenyan


investment professionals were talking about the growing tendency


to create successfully Africa to Africa fund, funds generated in


Africa for Africa. That being the case have you noticed you are


increasingly competing for those good investments? And if so, given


your remit, how do you calibrate, no, that is too good? How do you


balance that? I go back to the additionality guidelines I talked


about earlier. Every investment we make we have to be clear we are


bringing something you need that wouldn't happen without CDC. And it


may be capital but it may be no or expertise that it may be know-how.


It is that say there is more capital coming into Africa and South Asia


and this is what we want but CDC's mission is to try to do the hard


things and the need is there. If we look at the private sector


environment in some of those countries in the UK we have 64


million people and 15,000 companies with revenue is more than $50


million. In Ethiopia there are 17. The existing investable


opportunities that a lot of people are competing over may be small but


it needs the hard work by teams like CDC to grow smaller businesses. And


the other thing we do a lot of invest in good quality operators and


partner with them and take them to those hard places. I suppose this is


a double act, following on closely, for 20 years, from 95 until 2015,


there was not a penny extra provided by the taxpayer. I look at your


balance sheet and you have something like 2.7 billion of retained


earnings. In lots of retained earnings that you've put back into


the business also it should be noted that the taxpayer doesn't get a


penny back. So why now aren't you ramping up the potential amount of


capital? I know you are saying there is this investment but why was not a


penny but in for 20 years and all of a sudden you talking about a 6


billion cap. That seems to be a huge step up. To start with that, the


main focus of the economic development strategy which the


Secretary of State published last week is to try to make links to


global markets to harness more trade opportunities and hence reduce


poverty for Africa and South Asia which is where our focus is. It is


to focus on job-creating sectors, so construction, power, health and


education, financial sector. And we seem CDC as the principal mechanism


of doing that. Why now, to your question, it's a very fair question


and it adds up to the choice made by ministers of the day over the last


period. You understand that why now is a critical question went for 20


years, a long time, not a penny was put question you are getting good


returns, your growth rate was good. I think the thing that has changed,


a lot of the returns in the 90s up until I suppose halfway through the


last decade were in East Asia where the markets were booming. Most of


Africa in that period wasn't really investable. And because the British


development programme has always had a focus on Africa and South Asia, I


give it would've been curious to invest in CDC so it could invest


more in China when the markets were booming there. I think now that


these markets are more viable than they were previously, there is more


investable propositions and it also absolutely the case that the


Secretary of State and her predecessors who believe strongly


that the private sector is the engine development. Most jobs will


have to come from the private sector, they will have to provide


the tax base. It is that combination of things I would say. I think it's


a great question and I can understand from all the conversation


we have had with stakeholders in the last two months about the act of


Parliament, why now and why this amount of money. The reality is that


this plan to recapitalise CDC has been under development and


discussion between the company and the shareholder since 2012 when the


reforming strategy came in to say, is there a way in which CDC and the


UK taxpayer could respond to the need for long-term, patient capital,


doing exactly the sort of things Diana was talking about? In the


prediction made in 2012 there was a variety of scenarios will sub the


upside and the best in the base case one showed a need for more capital


required and that led to conversations in 2014 with the


shareholder for the recapitalisation that Mark is talked about. When we


structured that investment, the recapitalisation, aware of exactly


the danger Mr Bacon said that having force of pressure on capital, we


structured that investment so it could be drawn down in the form of


promissory notes over the next four years which is what we did but when


we did the projections in 2015 week showed that if things carry on going


we would need more capital. Last year we committed under 1. 2


billion. So a large amount of the potential need, subject to a


business case and the shareholder agreeing, is to allow CDC to


increase its investment rate from what was about ?200 million a year,


to what it is, 700 average for the last three years, 1. 2 billion last


year. And that would permit CDC to be an evergreen, revolving, slowly


growing balance sheet owned by the UK taxpayer but to commit money in


the markets we are focussing on for the next five years. My


understanding of the 735 is that you haven't even invested all of that.


There is a 450 million promisory note you have got. Before you have


invested that you are asking for... Well, so, it's a bit, a technical


point. What we have done is deposit notes, that means the company knows


they have the backing for their investments. What we didn't want to


do is hand over the bank notes. Because that would have been handing


over the cash before the company was going to be using it. So, the


taxpayer doesn't have to hand over the bank notes until the cash needs


to be drawn down. That's basically what's going on. You will appreciate


capital is a scare commodity. The idea you have 735 million there


which only 260 has been invested? The 735... You see the drift of what


I say. I totally see the drift. This was a specific recommendation by the


NAO in 2008 to make sure we manage our cash balances appropriately. At


the same time as also for the company being able to honour its


commitments that it has made into businesses. At the moment we have ?2


billion of ongoing commitments, so the NAO report shows how we came up


with the liquidity policy working with a Shear share and Treasury to


do this. -- shareholder. At the moment we have at the end of last


year, 223 million of cash which is 5% of our portfolio. The goal of the


promisere note is to come up with a an efficient use of taxpayers' money


as allowing us to make the scale of commitments we are doing. While you


are expanding the balance sheet, as well. Yes. This brings me to my next


point, the fear I have is that the risk of SATs rating CDC with cash,


we have seen that in many places, the Reg gram noet fund, how are you


going to manage that risk so it doesn't manifest itself in some of


the ugly and unfortunate ways we have seen? That is the key question.


That's the key question for the business case. The company are going


to need to explain to us why the 1. 2 billion is going to continue into


the future but why these are high quality investments which the


taxpayer can be confident will sustain a decent return record. I go


every few months or so have a sort of strategic discussion with the


board. I thought you were going to say poke around... It's not anything


the board wouldn't mind me saying. This is the point, you are going to


need to persuade us that the quality of the investment pipeline is such


as to justify any new capitalisation, never mind, you


know, what the volume is. They have to make a case, never mind the


next... Does the impact fund team have enough skill now to do this at


the scale you are talking about? Let me describe the picture from the


operating, from this chief executive's seat, I guess, so it is


fair that back in 2012 when we were given the mandate of invest only in


Africa and south Asia, but invest directly alongside funds, we didn't


have a team and we didn't know what the demand was going to be. What we


have learned over the last five years is if you put a highly


committed and talented team behind the strategy, you give it very clear


mandate of where you can invest additionality standards, development


impact, etc, and you hire the people with the right motivation, it is


amazing how much demand and need there is for the CDC team. Let me


say clearly no one at CDC is motivated by scale. We are motivated


by the quality of outcomes that we can general rate with capital. Do


you see then, you didn't even know was there, but turns out to be


latent demand, when somebody sees something done well and thinks


perhaps we can do that and put together a sensible case, does that


manifest itself? Very much so. Can you explore with us this question of


additionality more. Are you saying your very presence, for example, in


a territory that's rather marginal, would you would hope you are being


additional, where perhaps the economy is not sufficiently


diversified, where it is fragile, there isn't enough good


infrastructure, where there are poor transport links, a lack of


confidence, that your very presence is the thing that can make the


difference potentially to other investors over a period of time?


There is an element of that. But we haven't really even fully explored


that yet. You will have seen in the report that our local country


presence is still at a latent stage presence is still at a latent stage


and we want to increase that. Actually I think the demand has been


generated because the teams have gone out in a very focussed way, for


example, the direct team from scratch, and said these are our


seven priority sectors, what's the need in those sectors and


particularly if you look at Africa and the poorest cases of India,


there is enormous need, and what's the best way to get companies going,


get companies growing and what can we invest in? They've gone out and


knocked on doors and found really high quality aligned partners to


invest in. So in many ways, certainly on the direct side where


we had to start from scratch we generated our own pipeline. In funds


where we have been doing it since 2,000 or before 2,000, we were a


pioneer of this industry across Africa and south Asia, we now have


such a reputation in funds in that any high quality fund manager will


want to come to CDC first and get the seal of approval. It would help


a project to have your name alongside it, good, yeah. One more


question. You have had recruitment and retention difficulties, what are


you going to do about that? We will be working very hard to make CDC a


place that high quality people want to come to and to stay in,


long-term, and that's about selecting the right people, but it


is also about creating an environment of, say inspiration,


that people really enjoy and we all know that the next millennium group


of great graduates are coming in out of business school, this is the kind


of thing, this is the kind of work that inspires them. They don't just


want a financial bottom line, they do want to make the world a better


place and CDC can offer that to them. Thank you.


Recapitalisation decisions, particularly the CDC DfID


relationship. In 2015 the decision to recapitalise by 735 million was


made by DfID. According to the National Audit Office the DfID


report arguing the case was quality assured internally. It is


potentially a dangerous statement. So, was the DfID recapitalisation of


the CDC by 735 million in 2015 first suggested by DfID indly or was the


matter looked into upon question by CDC? As the chairman said, since


2012 we have been, certainly I personally have been making the case


and when Andrew Mitchell, when he was the Secretary of State, was


encouraging us to think this through. We weren't ready to do it


at that stage. So, I don't think it is the case that the shareholder was


pushed by the company to do this. I think the shareholder wanted to


encourage the company to have a bigger ambition, to make a bigger


distribution because we do think the CDC is a very unusual, got an


unusual capability. London obviously can be the capital market for


Africa. Other countries have DfIDs bigger. There was an opportunity not


being taken. We basically challenged the company to build a capability,


to absorb more resources and to use them well, that was basically the


direction of the conversation. So the recapitalisation, DfID produced


a report find ago strong case for recapitalisation. Because this was


quality assured internally, why did the department deem an external


analysis and audit on the report unnecessary? Why was it internal?


Well, there was quite a lot, Rachel may want to speak. There was a lot


of external dialogue. We had experts like Paul Collier, for example,


advised us on the future direction for CDC. The reference to the


quality assurance is part of a general system we have in the


department, so that the case put to ministers for spending large sums of


money doesn't come just from the team who would be spending the


money, there is an independent assurance from a group which is run


by the chief economist who has to - who is dispassionate, doesn't mind


which team gets the money, if you like, but provides a different point


of view inside the department to justify the case. But there was a


lot of external collaboration and dialogue, as well. You can see


because of the relationship between DfID and CDC there is a certain


discomfort when the watchdog is watching itself effectively. If DfID


felt it was ail to analyse the merits of the recapitalisation


itself but does not appoint a board member as it considers it not with


the depth of commercial investment and experience, can you explain why


DfID felt it was ail to analyse the recapitalisation case itself if it


does not feel it is capable of appointing a board member? Well, two


different things happening here. The job of the board and the board


members is to review proposals put forward by the executive team, Diane


and her colleagues, on each particular investment. Is it a good


idea to invest in this company? That is not a skills set that we are


hiring people to have inside the department. What we are hiring


people to be able to do inside the department is understand and make a


broader case for whether investing more in CDC versus other things we


could spend the money on is going to be conducive to achieving the


strategic goals that ministers have set. So, the report does explain -


explains and we talked this afternoon about the sort of pros and


cons of us appointing a civil servant to be on the board and our


view is that we appoint the chairman as the chairman has said, you know,


we can unapoint a chairman, but while they're accountable to us, we


don't think in addition to that we need to appoint civil servants on to


the board. The contradiction if you like in


what you are trying to do, on the one hand you said it was basically a


political decision massively to expand the balance sheet of CDC. Yet


on the other hand, you are saying that you don't want any oversight in


terms of how the new entity with expanded balance sheet potentially


will run. Well, I am trying to say something else. What I am trying to


say is there could be a strategic case for investing in the business


which is what the business case for the 735, which the NAO were


convinced by was, that's completely different to once you have a capital


base, how do you pick the businesses in which to invest? What I am saying


is the Government doesn't think it is a very good idea for civil


servants to be taking those decisions. You said that the demand


for more capital was something that was coming from the department, it


was coming from ministers. You mentioned Ministers, it wasn't the


CDC asking for more capital. It was the policy decision. Was it not?


Yeah, that's exactly right. We saw a bigger opportunity in these markets


for the reasons I have tried to run through. And those were politicians


and civil servants. Yet, at the same time, you are saying that you don't


wnt to get involved in that. Having identified the opportunities and


being... I am not doing very well... What I am trying to do is draw the


distinction between the strategic and the individual investment. Thank


you. You said earlier the previous Secretary of States supported this


idea. Isn't it true that the previous Secretary of State to that,


Mr Benn, who was the Labour Secretary of State, said, I remember


hearing him saying it on the radio, said explicitly that trade and


business and the private sector ought to do more to lift people out


of poverty than anything else, you mentioned Paul Collier, his book was


given that title because two billion people above that had been lifted


out of poverty by the private sector but until they've been lifted


they're still in that grey zone that you were talking about, is that


fair? I think that is fair. I don't normally help witnesses by the way!


Thank you very much. From the company side we think we


have an engaged active shareholder. We have quarterly shareholder


meetings, we have AGMs, committees within the board who interface with


relevant counterparties across DfID. We have a series of relationships


with DfID as a partner level, trying to create investments and work in


harmony together. I think CDC is a fundamentally


long-term business. We are the oldest DFI in the world, and I will


give it a couple of examples which goes to this incredibly important


point about the governance of CDC and how it must work over the decade


and a cross-party consensus. Kenya team was set up in 1964 by CDC. 20


years later in 1983 there was 145,000 smallholder farmers giving


product for 39 factories which made one in four cups of tea in the UK.


20 years for that investment. 20 years later, sell Pell, the first


big mobile phone company in Africa, was sold, and it has transformed the


economy in Africa and that was a CDC investment -- Celltel. And over a


long period, this is six years, if you look at Sierra Leone today,


which you asked earlier, it is a poor country, last year I was in


Freetown with the president and he thanked me, I did not do any of the


work but I was happy to hear the praise, about the work the teams at


CDC had done with the Ebola facility with Standard Chartered. There was


an amazing amount of work done by NGOs and DfID that we can't


contribute to but we did our bit to create the straight facility and


keep businesses going. He said, the thing we need now is power. Last


month CDC announced it is part providing the debt and the majority


amount of equity in a $150 million investment in plant which will give


49 megawatts of electricity which, in the low season, will double the


amount of electricity given to the whole country. And that is a


country, we have one 200th of the electricity they use. If we work on


it for two years and it is a long time, so it is incredibly important


that we have an institutional relationship which goes over the


years. I get all of that. I think you have described it very


persuasively and in a way I'm trying to use that to say, quite suddenly


ramp up the balance sheet? In theory we are custodians of taxpayers


money. I look at your balance sheet and it is very conservatively run,


you have 10% of your assets in cash. I think you are slightly


underinvested in terms of the extra 735 million. You have this


incredible track record of success and all of a sudden we are saying


we're going to transform this thing and completely expand the balance


sheet and you can see why we would be concerned about it. You're asking


the question I'm asking of the team in the Department and the company


about why can explain to me the business case for another


capitalisation. We will not be recommending another capitalisation


even if Parliament gives us the authority to, unless we are


persuaded that there is a case. Can I probe on that? This has puzzled


us. As Mr Kwarteng said, it seems like a policy decision to have more


available capital but it could go up to 12 billion. You go to CDC and


asked them to put a business case to see if they can spend it question of


CDC comes to you with a business case but would you ever say no. I'm


not sure who starts the process. If you have an opportunity in a


country, do you say to DfID, we think we can invest 2 billion in


something could you let us have the money and then put the business case


to DfID? No, that's not how it works, this is a long-term business


and the teams go out and generate pipelines of opportunities that are


sometimes a year, two years in the cooking. I would recommend the


committee looked at the rate of investment we have already achieved,


that is highlighted in the report, the ?1.2 billion a invested in these


markets in 2016. Even if we only stayed at that level and didn't grow


at all, we would need some money, and quite a large amount, to fund


that step up. Because we are such a long-term investor, it'll only be


when those seven, ten year investment start returning money


that we become... You've got a lot of cash, this promissory note, you


can actually expand your investments without additional capital. Do I


make a point, a broader point -- can I make a point? In relation to the


investment needs of Africa and South Asia over the next generation or


two, which are calculated in the trillions, what CDC is able to do at


the moment is very small. As we said earlier, CDC, although it has four


times as much of its business in Africa than the IFC does, it is


still small in aggregate terms. The investable opportunity and the


taking of it is what will get Africa beyond its a dependency and give


people their jobs and livelihoods and better futures. The investable


opportunity is going to be dramatically bigger than what CDC


can do. The question for us is, not how many good investment are there


out there, the question is, what is the rate at which CDC can sensibly


absorb more capital and spend and use it in a way that does not repeat


some of the mistakes of the pass? That is what we're focused on. That


is very reassuring. The fact you are focused on that is reassuring but


can I ask Mr Wrigley another question? You emphasised the


long-term nature of what you do so would you say the role for CDC


potentially in and invest the country where the conditions were


right to be assisting in the creation of a development


Corporation locally with you investing with other partners over a


long period of time? We have a whole series of ideas about how you can


take an idea to a country and creating development banks like in


the UK, the old three I invested in history, we have been thing about


that as one of the platforms we might do. So the only criterion


would be a political one, which is, if it within your remit? Are we


going back to St Helena here? I'm very glad you said it first, but


yes! If the remit were OK, that is the sort of thing, in a territory,


let's call it that, that would be among the many things you would


discuss question mark potentially, but can I add an important point?


You were nodding, can you put that on the transcript? And can I add one


incredibly important thing to this point about the absorptive capacity


of CDC and its ability to invest? I got asked a question in the select


committee about if the board of CDC will take capital from its


shareholder evicted nothing it could invest it in high development


impact. Meeting our return requirements and doing that well and


thoughtfully and I said absolutely clearly, no. The point I've been


trying to make is that we have been developing this business


operationally, all of the things they talked about with the teams


from the last five years and the conversations with the shareholder


about how can fund it, hopefully over the last five years, it is a


mutual decision. The shareholder has to want to provide the cash and the


company is to believe it can execute it well. I think we are reassured by


that, but turning to figure 18 on page 39, which gives the operating


costs as a percentage of portfolio value and no doubt those costs are


also have costs which figure 19 and others cover. And actually figure 20


is also useful. You have a projection, operating costs as a


percentage of portfolio value. You can read behind that there is a


portfolio value prediction you are making so you have a plan, but when


do you go to DfID and say, we are sure it is on track so we need to


draw down some money and he is our business case, will you do it? And


when do you think, we are not going to manage that? What assurances do


you put in place? You have this extra staff that is ready to do this


which is a cost and unless you are doing the business but they are a


dead weight cost. The process for that is that we in the middle of


concluding the strategy for the next five years and after that has been


approved and with the Secretary of State, we would work to create a


business case to provide any funding going forward. The reason that


metric is in there, by the way, something that we have developed


ourselves over the last three years, and it is thinking of the purpose of


this committee, value for money. And one of the things we will be doing


with the business case and the strategy discussions is saying to


the shareholder, here are a range of options of what we can do. Different


activities have different costs. Investing in high impact, people on


the ground, not through intermediary vehicles is much more expensive than


working in providing debt from London. Those numbers with the


illustrative forecast to show the NAO how we are strategically


thinking about costs. And on the staffing issue, we touched on this


earlier, but there will be a pressure on salaries because of


competition out there. You made a cogent case for how people want to


do this because they are not just after the bottom line, but figure


A19 highlights some of the issues around celery and we are worried


that there is a pressure on salaries. How are you managing that


risk to the business? When you need the people to do the job, but you


also don't want to go back to the bad old days when salaries went


exponentially to ridiculously high levels. I think the report paints a


clear picture of the changes being made as a result of the


recommendations, it was one of the first things I did as a new CEO. Now


we have to look at the sustainability of the organisation,


we have hired a lot of people quickly and it is a fantastic team


with a lot of different skills in it but matched to us being a long-term


business is we need long-term staff. We don't want to be a revolving door


and this is something that takes... I beg leave to ask the question


standing in my name on the order paper. We already have domestic law


that safeguards the environment. The great repeal bill also to be


introduced in the next parliamentary session will incorporate EU law


relating to environment and biodiversity into UK law. The UK


Recorded coverage of the Public Accounts Committee's session on overseas investment, with evidence from the International Development Department, chief executive of CDC, Diana Noble, and CDC chair, Graham Wrigley, from Wednesday 8 February.