The Department for International Development runs its own investment fund, the Commonwealth Development Corporation (CDC).
It was originally called the Colonial Development Corporation.
The CDC invests in private companies in “emerging markets” such as banks or mining conglomerates.
These firms contribute nothing to poor people.
The fund is under investigation for allegedly investing in fraudster James Ibori.
Ibori was jailed last year after looting millions from public funds as governor of Nigeria’s oil rich Delta State.
David Cameron has approved a way of using aid funding to offset military spending cuts.
The Department for International Development already shares some money in a “conflict pool” with the Ministry of Defence and the Foreign Office.
Expanding this pool will help the government meet a United Nations target on aid spending.
But the money would go towards military interventions in “broken and fragile states”.
This would free up official military funding to be spent elsewhere.
Government officials say that hundreds of millions of pounds could be shifted from aid to intervention.
Tory minister Douglas Hurd allocated £234 million in aid towards the Pergau hydroelectric dam in Malaysia in 1991.
The Malaysian government was buying £1 billion worth of arms from Britain at the time.
The British high court ruled in 1994 Hurd had acted illegally. The deal was of no benefit to the Malaysian people.