Global Policy Forum

By Micheal White

The government says it is launching a renewed attack on corrupt misuse of international aid by third world regimes in the face of accusations that British aid to the small south-west African state of Malawi was used to buy 37 Mercedes-Benz limousines. Clare Short, the international development secretary, issued categorical denials last night of reports that British aid - increased from £44m to £50m under Labour - was misspent in this way by the government of President Bakili Muluzi.

Whitehall did not deny that the Muluzi government had bought the cars with foreign aid, but was adamant the purchase was not with British aid, which it said was carefully monitored. Malawi diplomats in London also denied British money was involved.

Britain's high commissioner in Lilongwe, George Finlayson, has "remonstrated strongly" about the £1.7m purchase of top-of-the-range S-class Mercedes for senior ministers. The Commons cross-party select committee on aid, chaired by Bowen Wells, a Conservative, is poised to launch an inquiry into corruption, a problem increasingly high on western aid agendas since the 1998 riots in Indonesia that forced out President Suharto, brought elections a year later, and exposed the true scale of the kleptocracy that was the ruling elite.

Ms Short will not give evidence to the MPs in person when the inquiry starts but her officials have produced a survey that reflects her view that "corruption damages development" and her shock that this subject was taboo until recently. Gary Streeter, the Tories' shadow international development minister, told the Sunday Telegraph: "It is unacceptable for British taxpayers' money to fund such extravagance while children in Malawi cannot afford to go to school."

In a statement yesterday Ms Short accused Mr Streeter of being "characteristically misinformed. No British aid money has been used for this purpose". Malawi is held to be the world's sixth poorest country; it is hard hit by Aids and an estimated 64% of its people are malnourished.

"We are working in Malawi to strengthen the capacity of the government to make progress on anti-corruption, poverty reduction and development - including an anti-corruption bureau and [better] systems of economic and financial management," Ms Short said.

Mr Streeter's underlying target was what he called Miss Short's "naive" model for helping root out corruption. Under it, aid has shifted from project-based schemes to sectoral schemes, so that instead of being given to specific schemes such as schools or hospitals, funds now go to government departments.

To Tory dismay the bulk of Britain's £2.3bn aid budget goes through international bodies including the International Monetary Fund, the World Bank - and the European Union, whose feeble aid record on the ground is under pressure for reform led by Britain's commissioner, Chris Patten.