Britain demands reform in Pakistan in return for aid money

Britain is calling on Pakistani politicians to submit tax returns and to push through tough economic reforms after The Daily Telegraph revealed £300 million of UK aid was going towards controversial programmes in the country.

Pakistan is on course to become the biggest recipient of British aid, worth £1.4 billion over five years, but only if it meets a series of key demands, according to officials quoted by The Telegraph.

The donations include giving hundreds of millions of pounds of taxpayers’ money to the Benazir Income Support Programme, which has angered opposition politicians who say it is being used to bankroll the re-election campaign of Bhutto’s former party.

Critics such as Imran Khan say British aid means Pakistan’s political leaders have no incentive to reform a system where only about 1 percent of the population pay income tax.

Defending the use of British cash, a spokesman for the Department for International Development initially defended the programme, saying it was impartial and had the support across Pakistan’s political spectrum.

The ministry later issued a stronger statement calling for reform once elections have been held on May 11.

“We keep our programme in Pakistan under constant review, and will continue to do so after the elections,” it said.

“Economic reform in Pakistan, including on tax, will be critical post-election, whoever wins. It will be important for elected politicians to show leadership to the Pakistan electorate and a commitment to reform by submitting tax returns and paying tax due.”

An aid review conducted by Andrew Mitchell decided to more than double aid to Pakistan. Ministers have consistently said repeatedly said the cash will not be delivered if Pakistan failed to make reforms.

Last year, an investigation revealed that two-thirds of Pakistan’s MPs paid no income tax at all.

President Asif Ali Zardari, Benazir Bhutto’s widower, and Rehman Malik, the interior minister, were among those who did not file returns in 2011.

Pakistan is considering a tax amnesty, allowing evaders to wipe the slate clean with a one-off payment of 40,000 rupees (about £270).

At the same time Britain is helping fund cash handouts which many development experts believe are one of the best ways of helping live millions of the poorest families out of poverty.

In evidence to a parliamentary inquiry, Ehtisham Ahmad, a development economist, said the programme’s name meant the money would be associated with Benazir Bhutto’s Pakistan People’s Party, led by her husband and son.

“This is the re-election campaign of Zardari, which is funded by DfID,” he said.

The Select Committee on International Development will publish its Pakistan report on Thursday.