In a written Commons answer, Clare Short, the international development minister, said yesterday to the Labour MP Lindsay Hoyle: 'In assessing Belize's eligibility for debt relief, the UK and Belize governments have jointly commissioned a study from KPMG to review the regulation of off-shore financial services and the effect of tax exemptions on pro-poor programmes.' Ms Short said: 'When the study has been completed, and discussed with the government of Belize, a decision will be made on Belize's eligibility for debt relief.'

The Minister said that the two governments had written to KPMG 'to confirm that the study should cover the issue of public investment companies'. This includes Carlisle Holdings, in which Lord Ashcroft has a substantial interest, and whose subsidiaries include the Belize Bank, Belize Telecom and other interests.

It was at a Christmas cocktail party held by Belize Bank that Lord Ashcroft had a dust-up with Tim David, the British High Commissioner. The argument that took place was sufficiently extreme to cause Lord Ashcroft to write a note of apology to the High Commissioner next morning in which he said that he had behaved 'undiplomatically'. A friend of Lord Ashcroft has reportedly confirmed a confrontation between the two men on the subject of the KPMG report, and described it as 'a sensitive issue'. He said that the government was 'putting the bite on Michael [Ashcroft] to weaken him' by trying to undermine his financial base.

Other reports suggest that the row was over the attempts by Labour party activists to scupper Lord Ashcroft's peerage, which were a cause celebre in the UK press at the time and caused much embarrassment to all concerned.

Belize seems to be rather a thorn in the side of the UK government and it's not making life easy for Gordon Brown. Whilst he's pledged debt relief to a number of countries, the government is said to be uncertain about extending such a package to a tax haven which has no VAT and which has extensive offshore tax exemptions. But KMPG has said it cannot look into Belize's VAT situation or the tax regime because it would be contrary to a 1982 treaty between Belize and the UK.

It is not the first time that Lord Ashcroft has clashed with government officials. Previously, former high commissioner, David Mackilligin, said in a letter to the London Times that Lord Ashcroft's system of offshore trusts in Belize had effectively opened the door to a wave of money launderers.

Ms Short has said the debt relief announced in 1997 by the chancellor, Gordon Brown, applied only to countries 'committed to international development targets, are actively pursuing sound economic policies that benefit the poor, are promoting responsive and accountable government which encourages transparency and are bearing down on corruption'.