Ministers slash aid in revenge for Pergau

MINISTERS are planning savage cuts in Britain's foreign aid programme as an act of revenge against the department which exposed the illegal use of aid money to fund Malaysia's Pergau Dam project, senior government officials said last night.

The planned cuts of around 40 per cent in direct aid to poor countries - the equivalent of scrapping the entire aid programme to Africa - are strongly backed by the Treasury and will come before a Cabinet committee this week.

Britain's leading aid groups are outraged, and will tomorrow launch an unprecedented joint campaign to defeat the plan. Harriet Lamb, campaign co-ordinator for World Development Movement, asked last night: "What can be more vindictive than to punish the world's poorest people because government departments have been caught with their hands in the aid till?"

Last year a judicial review found that ministers had broken the law by earmarking pounds 234m from the aid budget to help finance the building of the Pergau Dam as part of an arms deal with Malaysia. It was the Foreign Office's Overseas Development Administration, which administers aid, that first identified the misuse of funds.

Yesterday a senior Foreign Office official said: "I know it is true the Treasury is pushing for these aid cuts because it is trying to get its revenge over Pergau."

The aid programme takes less than 1 per cent of government spending, but the proposed cuts revealed by the BBC yesterday will be twice as severe as those faced, on average, by other Whitehall departments. Treasury ministers want to lop 12 per cent off the aid budget, as opposed to an average 6 per cent cut elsewhere.

Because an ever-higher proportion of Britain's shrinking aid is made up of fixed contributions to international agencies, including the World Bank and the European Union's aid programme, the cuts would be concentrated on direct assistance to the world's poor. Foreign Office sources say the result would be to slash this direct aid by 40 per cent. ODA staff have been asked to work out how to slash emergency aid to such crisis spots as Bosnia and Rwanda by half.

The proposed cuts fly in the face of promises by John Major and his ministers to increase aid. Since the Conservatives came to power in 1979, Britain's aid has fallen from 0.51 per cent of GNP to 0.31 per cent, against a UN target of 0.7 per cent. Mr Major promised at the Earth Summit in Rio de Janeiro three years ago to progress towards the UN target, and last March the aid minister, Baroness Chalker, said: "We are committed to a larger proportion of our GNP as our prosperity increases."