BRITAIN last night threw down a direct challenge to Paul Wolfowitz’s leadership of the World Bank as the Government announced that it was withholding a £50 million payment in protest at the conditions attached to aid for poorer countries.

The decision by Hilary Benn, the International Development Secretary, reflects growing concern over Mr Wolfowitz’s aggressive anti-corruption campaign, which has led to the suspension of mutlimillion- dollar loans and contracts to countries such as Chad, India, Argentina, Congo, Kenya, Ethiopia and Bangladesh.

The unexpectedly robust public attack by Mr Benn, who is close to Gordon Brown, will sound alarm bells within the US Administration about relations with Britain when Tony Blair departs No. 10.

Mr Wolfowitz, who took over as President at the World Bank 15 months ago, is best known as one of the chief architects of the Iraq war during his four years as the deputy US Defence Secretary.

Critics, who include a clutch of European governments and many senior members of the bank’s staff, claim that the anti-corruption campaign threatens to undermine the bank’s primary purpose of eliminating global poverty by being too ideological, arbitrary and high-handed. “In the same way that the neocons tried to impose democracy on Iraq,” said a source at the bank. “They are trying to impose their own economic and political model on Africa — without recognising the reality of the situation on the ground.”

Mr Benn said that by continuing to foist unwanted policies on developing economies, Mr Wolfowitz had reneged on his commitments to reform the conditions attached to aid programmes.

Mr Benn criticised the pressure the World Bank put on poorer countries to pursue privatisations and trade liberalisation. Although he said there was nothing wrong with setting some conditions, “when it comes to economic policy choices I don’t think it’s right that we should be telling other countries what to do”.

Mr Benn renewed his attack on Mr Wolfowitz last night, claiming that the World Bank had an excessively narrow focus on fighting corruption. “Our job, and the job of [the bank], is to help eliminate poverty. This means that we should not walk away from our responsibilities to poor people.”

Mr Wolfowitz, who now faces an uncomfortable press conference when he arrives for the bank’s annual meeting in Singapore today, has said that lending has risen slightly under his leadership to $23 billion. He has also said that he does not want to see an estimated 10 to 25 per cent of the money being lost to corruption.

Mr Wolfowitz’s allies claim he is being unfairly caricatured by liberals at the bank, who greeted his arrival with satirical claims that he brought along an old “map of Iraq (with hundreds of red x’s denoting ‘WMDs,’ hundreds of black x’s denoting ‘Oil Well$,’ and one blue x denoting ‘decent sushi restaurant’”.

Danny Leipziger, the World Bank’s vice-president for poverty reduction and economic management, said yesterday that Mr Benn’s comments were the first he had heard of Britain’s protest.

However, the Government last year registered strong objections against the World Bank’s suspension of $800 million in loans for maternal and children’s health in India because of corruption concerns. The decision, complained Britain, had been taken without proper consultation.

Britain and other European countries pressed Mr Wolfowitz in April to put greater emphasis on fighting corruption by building institutions in the developing world rather than simply suspending loans.

Although Mr Brown has worked well with Mr Wolfowitz in the past, some at World Bank suspect he is behind Mr Benn’s assault. They claim that the attack helps put some distance between Mr Brown and the White House, and that it chimes with his ideological bent. “We have seen in the debate about UK public services,” a source close to Mr Wolfowitz said, “that Brown is a ‘spend first, reform later, sort of guy’.”

Britain’s suspended £50million payment is for a special bank fund and will not affect aid programmes for which Britain is still expected to contribute £500 million next year.

Christian Aid’s head of policy, Charles Abugre, has called on the Government to withhold all its contributions to the World Bank. “This is only a first step,” Mr Abugre said. “We now urge Britain to go the extra mile.”

The attack on the World Bank from Britain came as Mr Wolfowitz was embroiled in a row over allowing the institution’s critics access to the annual meetings.

Singapore has already barred more than two dozen protesters from entering the city-state.

Increasingly surreal security measures have seen protesters being warned to keep their voices down and not to use microphones. All demonstrations are restricted to one area, smaller than the size of a basketball court.

Mr Wolfowitz said that Singapore had appeared to have gone back on an arrangement to admit accredited activists. He said of the bans: “So far we’ve had no satisfactory explanation why.”

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