West accused of fiddling figures on Iraq aid

Britain and other Western nations are using huge debt write-offs to Iraq to boost development aid statistics and give a misleading impression of their generosity to the Third World, campaigners say.

The UK, France, Germany and Italy have all bracketed debt cancellations to Iraq as part of their assistance to the world's poorest nations.

Figures released today by the Organisation for Economic Co-operation and Development are expected to show that most, if not all, of the 15 nations in the EU before its 2004 expansion increased aid contributions.

But the statistics will include massive write-offs to Iraq in 2005 when the UK cancelled €499m (£350m) of debt to Baghdad, France €1.6bn, Germany €1.28bn and Italy €925m.

A report released yesterday by non-governmental organisations said that, while the countries were not breaking international rules, they were misleading the public.

The document, compiled by a group including Oxfam and ActionAid, accused many European countries of "massaging their aid figures in a way that can mislead the public". It adds: "In the case of Iraq, the rationale for cancelling these debts has more to do with geopolitics than poverty reduction. These transactions should not be allowed to count towards countries' headline aid figures."

Chris Davies, leader of the Liberal Democrats in the European Parliament, said: "We fail to meet our UN targets on development aid and yet we fiddle the figures when it is in our interest. Actions like this breed cynicism in the long-run."

In addition to the debt cancellation for Iraq, millions of euros were also written off for Nigeria, with the UK setting aside €1.6bn under a deal negotiated through the Paris Club.

Though debt cancellation has traditionally been a priority for campaigners, the Iraq war has made the issue politically controversial. The NGOs accused European countries of breaking commitments made at a UN summit in Monterrey, Mexico, in 2002 in which they agreed that "resources provided for debt relief do not detract from overseas development aid (ODA) resources intended to be available for developing countries". That charge was rejected by the British Government, which said that it was operating within agreed guidelines. The Monterrey consensus "makes no mention of ODA accounting, and ODA accounting was not within the competence of the Monterrey meeting", said a British official.

But Oxfam argues that the latest figures released by the UK suggest that its aid may actually have fallen between 2004 and 2005 if debt relief for Iraq and Nigeria is excluded.

In addition to debt cancellation, €840m of cash counted as development aid went to housing refugees within European countries and €1bn on education students within the EU. The NGOs claimed that €12.5bn - roughly one-third of all aid spent last year by EU governments - was not given directly to fight poverty.

EU countries are committed to setting aside 0.39 per cent of their gross national income for development by the end of this year with individual nations providing at least 0.33 per cent.

The European commissioner for development, Louis Michel, said that including debt write-offs was "clearly not prevented" by OECD criteria. His spokesman added that the EU would soon draft rules to better co-ordinate national aid programmes, which would include addressing the definition of what constituted official aid.