Letter reveals how the Tories aided Ashcroft

JOHN MAJOR'S government hired a consultant to reform Belize's banking laws, but then rejected one of his key findings because it would cost the Tory tycoon Michael Ashcroft millions in tax.

The Foreign Office revealed last night that British aid paid for a report by Rodney Gallagher, a former Foreign Office official, on offshore banking and tax in the Central American state where Mr Ashcroft had major interests.

But, when Mr Gallagher called for an end to a 30-year tax exemption, the Foreign Office intervened. Mr Ashcroft, meanwhile, threatened to sue because the report claimed Belize's banks, one of which belonged to him, were being used to launder drug money. The document was withdrawn.

Tony Lloyd, the Foreign Office minister, confirmed that his department intervened with a letter to the then Belize prime minister, Manuel Esquivel, "following representations by Mr Ashcroft in 1994 about the implications of these proposals". But, he added: "We would have taken similar action on behalf of any British businessman who thought his interests might be affected in this way."

Mr Ashcroft said his concern had been for his shareholders and that he reacted as any company chairman would in the circumstances.

Tony Blair suggested in the Commons that Lord Neill's Committee on Standards in Public Life should investigate Mr Ashcroft. However, such an investigation is unlikely because Lord Neill is reluctant to look into specific cases.