A cross-party committee of MPs has criticised the European Union for not directing aid to the poorest nations of the world.

In a report published on Tuesday, the international development select committee found that only 39 per cent of aid was sent to "low income" countries.

The majority of aid was instead directed at "middle income" countries, such as Bosnia, to ensure stability for political reasons in countries surrounding the EU.

"The delivery of European development aid has been reforming but there is much more needs to be done," said Tony Baldry, chairman of the committee and Conservative MP for Banbury.

"But the most important conclusion if European development assistance were to be properly directed at the poorest of the world we could make an enormous impact on helping to get thousands of people out of poverty."

The Department for International Development is expected to respond to the findings shortly.

"We welcome this comprehensive and informative report. We will study it in detail and give our considered opinion in the next few weeks," a spokesman said.

Shadow international development secretary Caroline Spelman said she was "appalled" by the report's findings.

"The failure of the EU aid budget to tackle poverty is well known. What is shocking is that it continues to deteriorate. This report confirms that it goes from bad to worse," she said.

"A third of our budget is dispersed via the EU. We cannot let this continue unless it is reformed urgently. Labour have had five years to reform this budget and they have failed. Clare Short should face up to the criticisms in this damning report

"At the moment EU aid fails the poor. It spends more in Poland than it does in Africa, Asia and Latin America combined. There is obviously something wrong here. It should have a much clearer focus on tackling global poverty.

"Instead it is a bureaucratic nightmare that has abandoned those most in need. The situation is totally unacceptable and cannot be allowed to continue."

The European Union was accused of "failing the poor" by Howard Mollett, EU campaigns officer for the British Overseas NGOs for Development (BOND).

"Billions of euros have been lost as pawns in geo-political chess games, but reforming aid allocation is a crucial task," he said.

"It is time to reverse the decline in aid to the poor, and correct the EU's dismal performance. The potential for EU aid is great, and worthy of the effort required to improve on its current performance."