In a dramatic move which was immediately welcomed by campaigners for the relief of Third World debt, the Government revealed it was ready to wipe the slate clean by not demanding repayment of the money it is owed by all the world's Heavily Indebted Poor Countries (HIPC).
Although the Government has been at the forefront of international moves to relieve the crippling burden of debt on the poorest nations, it has until now resisted the growing clamour by campaign groups to unila terally"drop the debt".
The U-turn, which follows similar moves by the United States, will be formally announced at a Downing Street seminar on debt relief on Tuesday by the Chancellor, Gordon Brown and Clare Short, the Secretary of State for International Development.
They will name four countries which will benefit from Britain's actions by the end of next month. Ten will stand to gain by next April and more than 25 by the end of next year.
The huge aid package will be negotiated on a country-by-country basis and strings will be attached. Under "conditionality" rules, the indebted countries will have to show that the money they save will be spent on relieving poverty and economic development.
The surprise announcement follows close contact with other Western nations and forms part of an enhanced HIPC programme discussed by the European Union, the G7 nations, and the International Monetary Fund. The Treasury said last night that Britain was now prepared to approve "100 per cent forgiveness" for all poor countries because a clear link was in place under the international programme between debt relief and alleviating poverty.
Government sources denied that ministers had buckled under strong pressure from lobby groups. They stressed that money would become available to these nations on a bilateral basis after they had put forward detailed proposals to invest in schools, hospitals and ensuring clean water supplies. The Treasury declined to put a figure on what the aid package would be worth but Whitehall sources said it would eventually amount to hundreds of millions of pounds.
The global campaign to end Third World debt has been led by aid agencies and supported by both dignitaries, politicians and pop stars. It was behind the protests which surrounded the recent Seattle trade summit.
Bob Geldof welcomed the initiative. "It's an amazing thing to do, and frankly we will not be remembered for wheels and Domes and fireworks. I think future generations will remember a very simple and confident gesture like this," he told BBC 1's Nine O'Clock News.
Bono the singer in the Irish rock band U2, said: "I am absolutely delighted. Tony Blair and Gordon Brown will be remembered for this."
A Christian Aid spokesman called on Mr Brown to redouble his efforts to persuade the other members of the G7 club of wealthy industrialised nations to do more. "Christian Aid welcomes [Mr] Brown's announcement that the Treasury is unilaterally forgiving 100 per cent of debt owed it by the world's poorest nations. It is the Millennium gesture Christian Aid has been pushing for. However, it is not enough. We now urge Gordon Brown to strenuously lobby the finance ministers of the G7 to follow suit.
"As long as the G7 continue to attempt to recoup unpayable debts, the children of those impoverished nations will carry on dying through lack of health care - the grim harvest of the loan-shark policies of the G7, the IMF and the World Bank."
Ann Pettifer, from the Jubilee 2000 group, said: "We now need to persuade Japan, Germany and France to do the same." Andrew Simms, head of the global economic programme for New Economics Foundation, the policy group advising Jubilee 2000, said: "This debt was keeping all these nations in debtors' prison. Today you can hear the sounds of the chains of debt dropping in time for the millennium. Perhaps it will give us a reason to celebrate the millennium after all."
Further reports, page 3