Poorest nations lose as cash goes to Iraq

British government aid programmes aimed at some of the poorest people in the world are to be emasculated to allow ministers to commit £540m in aid to help rebuild Iraq, The Independent has discovered.

As America runs into difficulty drumming up the $36bn (£21bn) it needs for Iraq from more than 70 countries gathered for a conference in Madrid, Britain is acting as chief cheerleader. But finding the promised British contribution without raising taxes or cutting government spending has meant that the overseas aid budget is being used.

On 25 April, two weeks after Saddam Hussein's statue was toppled in central Baghdad, Tony Blair gave an assurance to British charities in a handwritten note that "funds will not be redirected from other emergencies ... nor from programmes supporting poor people elsewhere". But the Department for International Development (DFID), now led by Hilary Benn, has been told to find up to £100m by reducing programmes in countries such as Peru, the Philippines, Bolivia and South Africa.

"This means Tony Blair has broken his promise," said Justin Forsyth, policy director at Oxfam. There was similar condemnation from Christian Aid, while Caroline Spelman, shadow International Development Secretary, said it was "morally wrong" to take aid from other countries to fund the rebuilding of Iraq. President George Bush has persuaded Japan to pledge $1.5bn for Iraq next year. South Korea and Canada have come up with a further £206m and the World Bank is lending Iraq up to £3bn. But German and French unease means the European Union is limiting its contribution for Iraq to a relatively paltry £140m from 15 countries for one year.

The American blueprint for the invasion and occupation of Iraq foresaw a virtuous circle whereby billions of dollars from oil exports were to pay to rebuild the country.

Attacks on Iraq's oil-export pipelines by the Iraqi resistance have reduced exports to a trickle, wrecking the business model for the American-led occupation.

The International Development Secretary, who is leading the British delegation to Madrid, will tell the conference that £540m in British aid is being committed to Iraq for the years 2004-07. A spokesman for DFID said yesterday: "Yes, we are going to have to reprioritise where the money goes." But he added that final decisions on which projects would be cut had not been made. Mr Benn said in a statement: "We had already planned to reduce our overall allocation to middle-income countries in order to increase our spending in the poorest countries."

On 10 April, the day after Saddam Hussein's regime crumbled in Baghdad, the former international development secretary Clare Short told the House of Commons that aid needed to rebuild the country would not be at the expense of other poor people.

LOSING VITAL RESOURCES

BOLIVIA

The poorest country in South America, suffering from a huge wealth gap and social unrest.

SOUTH AFRICA

Has a soaring Aids/HIV rate. There are more than five million sufferers, 250,000 under the age of 14.

RUSSIA

More than half of the population live on less than $11 a day. There are also at least 443,000 internally displaced people.

PERU

Despite its rich landscape and vast potential wealth, the development of Peru has been thwarted by endemic corruption and failure to address social and economic inequalities. As a result the average annual income is $1,980 and one in ten in the 27.1m population is undernourished.