Skip to main content

Arms Exports

Volume 455: debated on Wednesday 24 January 2007

I am pleased to have secured this important debate on British arms exports.

I visited Angola in the autumn of 2006 with a team from Chatham house. We were reflecting on the 30 years of civil war in that country. It caused mayhem and suppressed development there, and hundreds of thousands of people died or were maimed as a result. I asked the leader of Unita and the MPLA during that tour and as many other people as I could what that war was all about. No one was able to give a proper explanation for the conflict, yet it blighted the country for more than 30 years. We know that it was a proxy for the cold war, but it was fuelled by arms exports from this country and other western countries, who kept that conflict going for many a year.

The issue is important because it centres on the fundamental integrity of this country. Our desire is to be perceived by the world as upholders of anti-corruption and anti-bribery practices. I want to concentrate on the question of arms exports. Debating time is necessarily limited today, so I have given the Minister notice of the sorts of questions that I would like to raise. I would have liked to have time to speak about export credit guarantees, the role of overseas subsidiaries, Britain’s welcome commitment and promotion of the arms trade treaty, the role of arms brokers, the impact of the millennium development goals on selling arms to developing countries, and the impact of the Export Control Act 2002 and the need to update, embellish and extend it.

Today we have an elephant in the room. It raises some serious questions about the Government’s integrity. The Department of Trade and Industry is one of a number of Departments that needs to address the issues that I have raised with the Minister and which I said were pre-eminent in the list that I presented to his office earlier this week. They were the al-Yamamah deal—the Serious Fraud Office bribery investigation that was discontinued in December—and the investigation into the air traffic control contract in Tanzania.

The hon. Member for Kingswood (Roger Berry) would like to contribute to the debate, and I want to give him some time; and my hon. Friend the Member for North Norfolk (Norman Lamb) has indicated a wish to make a short contribution on the Tanzanian deal.

I heard from the Minister’s office last night that he cannot comment on the Tanzanian air traffic control contract because the SFO investigation is still under way. I believe that he could still comment on some of the background issues without prejudicing the investigation, especially on which Ministers supported that deal and which objected when the contract was agreed. However, the message from the Minister’s office went on to say that, for similar reasons, he could not comment on the Saudi Arabian al-Yamamah deal.

I beg to differ. After all, the investigation was discontinued on 14 December last year. The DTI must recognise, as the City clearly does, that upholding the United Kingdom’s desire to be recognised internationally for integrity and for our anti-corruption stance is paramount. Attempting to hide from the issue or to sweep it under the carpet is not acceptable. The Minister should relish the opportunity to demonstrate to Parliament and to the outside world the integrity of the Government’s approach.

My noble Friend Lord Garden received a letter from the Attorney-General about the al-Yamamah deal, giving the background to the case. The letter stated:

“I should make clear that commercial considerations played no part in the SFO decision. Rather it was based on potential damage to the UK’s counter-terrorism strategy, and ultimately on the risk to the lives of our citizens and service people if the case had gone ahead. The judgment was that UK co-operation with Saudi Arabia in the counter-terrorism field is of crucial importance”.

I would be grateful if the Minister were to make clear what national security was at stake.

What evidence is there to confirm that the head of the SIS and MI6, Sir John Scarlett, endorsed the proposal to discontinue that investigation? Will the Government publish the explanation that they gave the Organisation for Economic Co-operation and Development in respect of the decision to halt the investigation? How do the Government square that decision with their anti-bribery laws and their commitment to the OECD anti-corruption convention? Does the Minister accept that, in respect of bribery and corruption, it is as important to be seen to uphold standards and pre-declared commitments as it is to uphold them? What damage would be done if the Government reversed their decision? On what grounds will the Government justify the discontinuation of the al-Yamamah bribery investigation in their report to the OECD in March?

Is it not the case that Britain’s involvement in the arms trade makes it a bigger target for terrorist attacks? Given that al-Qaeda’s stated objective is the elimination of the House of Saud, selling arms to Saudi Arabia is most likely to provoke the kind of terrorist attack that the Government claim they seek to avoid.

The Attorney-General’s letter to Lord Garden went on to say that

“Saudi Arabia is a source of valuable streams of intelligence on Al Qa’ida and other terrorist activity which may represent a threat to the UK, our citizens in the UK at home and abroad and to our Armed Forces; and that if Saudi Arabia were to withdraw that co-operation, the UK would be deprived of a key partner in our global counter-terrorist strategy.”

I question the plausibility of that claim.

It is incumbent on the Government to explain why Saudi Arabia would not wish to co-operate with the UK. Irrespective of arms or commercial dealings between the two countries, why on earth would they not want to co-operate? It is in our dual interests to ensure that that co-operation on intelligence continues. It is churlish and ridiculous to argue that, because an investigation might uncover fraud and bribery, Saudi Arabia would not wish to co-operate with the United Kingdom for its own national benefit. I seriously question that decision.

The Attorney-General’s letter continued:

“I did not consider that it was ever likely to result in a successful prosecution anyway.”

On how many occasions have the Government discontinued such an investigation on the basis of what they consider to be the public interest—before the investigation has been completed? Some serious questions clearly need to be answered. The Government diminish themselves—and worse the country—and damage their reputation as an upholder of standards and a champion of anti-corruption. A parliamentary answer provided for me on 9 March by the Minister for Climate Change and the Environment, who was the Minister for Trade at the time, states that export credit guarantees

“have been issued to BAE Systems and its subsidiaries in the last five years for the Al Yamamah contracts in Saudi Arabia.”—[Official Report, 9 March 2006; Vol. 443, c. 1722W.]

I am told that the total amount of insurance given through the scheme is £1 billion for that deal. Will the Minister tell us what financial commitments were made by the taxpayer for that contract and what public funds have been invested in that project? In addition, how much money invested to provide guarantees to the project has been recovered by the Government and how much is outstanding? There are serious questions to be raised about this issue.

In conclusion, I remind the Minister that on 9 December the Minister for Trade in the Foreign and Commonwealth Office stated at a meeting in Jordan that

“it was fitting that on the eve of this conference…Governments serious about fighting corruption now have an opportunity to sit down with one another and agree how we can work to reduce the corruption that undermines economic development, limit spending on health and education and hits the poorest people hardest”.

At the same time, the Secretary of State for International Development said in a Government press release:

“Tackling corruption wherever we find it—whether here or abroad—is essential. We will not tolerate those who extort, corrupt and deceive.”

I noted that yesterday the Director of Public Prosecutions, Sir Ken Macdonald, said when speaking to the Criminal Bar Association:

“It is critical that we understand that this new form of terrorism carries another more subtle, perhaps equally pernicious, risk. Because it might encourage a fear-driven and inappropriate response. By that I mean it can tempt us to abandon our values. I think it important to understand that this is one of its primary purposes.”

I would be grateful if the Minister would address my questions and reflect on whether the circumstances in which the decision to discontinue the investigation of the al-Yamamah deal was made have, in fact, compromised the values of this country.

I understand that both hon. Members who wish to intervene must have the permission of the mover of the motion and the Minister. I will rely on them to leave the Minister enough time to respond.

I congratulate the hon. Member for St. Ives (Andrew George) on securing this debate and, like him, I will be interested in the answers to his questions; there will almost certainly not be time to answer them all, but I hope that the Government will respond in some manner.

I hope that the Government appreciate that the reason why Labour Members have been deeply disappointed by and critical of the senior fraud officer’s decision in relation to BAE Systems and Saudi Arabia is that time and time again we have acknowledged the Government’s record in strengthening arms export controls and in leading the introduction of measures to tackle bribery and corruption internationally. Therefore, I feel deep disappointment, sadness and concern about the decision made in December.

I have only three questions. First, does the Minister accept that the purpose of the Organisation for Economic Co-operation and Development convention was to prevent any signatory from using national interests as a justification for tolerating corruption? If that was not the purpose of the convention, what on earth was the purpose, and why did we regard it as such a major step forward? Secondly, does my hon. Friend accept that the early termination of this particular investigation for reasons other than the legal merits of the case sends a clear message that companies trading with our strategic allies can bribe with impunity? That is entirely contrary to the message that British defence manufacturers have repeatedly given. They support the Government’s measures to tackle international bribery and corruption because they believe that it is in the interests of British industry and jobs. Thirdly, the Government argue that they must balance the need to maintain the rule of law against the wider public interest—that is the basic justification for this decision. Does my hon. Friend agree that balance is impossible when investigations are terminated part way through? We cannot possibly know whether a prosecution would or would not have been in the public interest.

I congratulate my hon. Friend the Member for St. Ives (Andrew George) on securing this important debate and I endorse everything that the hon. Member for Kingswood (Roger Berry) has said. I will concentrate on the Tanzanian air traffic control system. Irrespective of the outcome of the investigation by the Serious Fraud Office into the deal, the granting of an export licence for this military air traffic control system is an absolute scandal. I regarded it as such at the time and I continue to be of that view. To be clear, we are talking about selling a military air traffic control system for $40 million to one of the most heavily indebted countries in the world—a country that does not have an air force worth having a name. At the time, there was no justification for the deal. The British Government and the Prime Minister knew that that was the case and yet they sanctioned granting an export licence. It is a stain on this country’s reputation that that deal was permitted.

I will focus on one particular aspect of the deal, which so far has not received much attention: the financing of it. As I have said, the deal was worth $40 million. Tanzania had to obtain approval from the International Monetary Fund to borrow the money because it was a heavily indebted country. To get approval from the IMF, it had to demonstrate that it was a concessional loan. Barclays Bank provided Tanzania with a concessional loan and so, in effect, part of the loan was a grant by Barclays to a heavily indebted country. That does not make sense. Commercial banks do not make such concessional loans so why did Barclays Bank? I asked Barclays many times when I was investigating the issue back in 2001-02, but answers were not provided. The spotlight needs to be on Barclays Bank, as well as on BAE Systems and the Government’s role in the deal.

I end by saying that the Tanzanians are now fighting back and want answers to these questions. I have a letter from the Consortium of Concerned Tanzanians International, in which they ask rather a basic question:

“How does a military radar that watches over one third of the nation help us defeat AIDS, improve our educational system and create more jobs for our young people?...The deal was not only wrong, it was unethical and indeed immoral”.

The Minister said that he cannot answer questions about that. I do not understand that as it is not sub judice. There are no legal proceedings as it is an investigation. I hope that in this debate or in writing he will be able to provide some answers.

I start in the traditional way by congratulating the hon. Member for St. Ives (Andrew George) on securing this important debate. I will widen the discussion and talk about our whole approach to export control in this area. As the hon. Gentleman said, he has asked my office a number of written questions in advance. As he has not had time to ask all of those questions, he will appreciate that I do not have time to answer them all in this brief debate.

Understandably we have talked about Saudi Arabia and Tanzania and, as hon. Members will understand, I cannot comment on either past or ongoing Serious Fraud Office investigations. The Government's decision to issue export licences for an air traffic control system for Tanzania was taken after very careful consideration of the application against the Government's consolidated EU and national arms export licensing criteria. The Government listened and responded at the time to concerns expressed in Parliament and elsewhere.

I can assure the hon. Gentleman that any applications to export to Saudi Arabia are subject to the same degree of rigorous scrutiny. However, I am afraid that I shall disappoint him and other colleagues when I say that I cannot add to the statements that have already been made about the discontinuance of the SFO inquiry. That is partly because my Department does not lead on this issue, but mainly because the Attorney-General and others have already made statements about it. It would not be appropriate for me to say any more than the Government have already said in making their position clear.

It is entirely understandable for hon. Members to be concerned about bribery and corruption. The Government share that concern and are committed to working with our international partners and the business community to ensure that there is effective action here and abroad to tackle the problem of corruption. That is demonstrated by our ratification of the OECD convention on combating bribery of foreign public officials and by the Anti-terrorism, Crime and Security Act 2001. However, there were particular issues in this case, which the Attorney-General articulated.

The Minister says that we will understand why he cannot add to the comments made by the Attorney-General or answer the questions that we have reasonably put to him, but I am not sure that I do. After all, the Minister’s comments would not prejudice an investigation that has been discontinued, so he surely has the freedom to address it without creating a sub judice situation. It is important to uphold the standards to which this country subscribes.

Of course I recognise the hon. Gentleman’s interest and concern, but my Department does not have the lead on this issue. It is a matter for those elsewhere in the Government, and the Attorney-General and others have already given the reasons. At the centre of the issue is a concern about this nation’s security in the face of terrorism, so Ministers will be understandably loth to say a great deal more.

Does the Minister acknowledge that his Department is responsible for the Export Credits Guarantee Department, which in turn has a clearly defined policy on bribery and corruption, and that some of the questions raised this morning relate to that wider Government responsibility, rather than specifically to the responsibility of the Attorney-General?

Of course we are involved in export control, and we discussed that at the Quadripartite Committee. However, the decisions in this case were, appropriately, made in other sections of the Government, in which I do not lead. As I said, issues of public security are involved, and it is sometimes difficult for Ministers to say a great deal about the intelligence. However, there will no doubt be other opportunities to raise the matter in the House.

Let me say something about the international arms trade treaty.

Of course I shall be interested to hear about the international arms trade treaty—indeed, I congratulate the Government on it, as I said at the beginning—but the fact is that some of my questions can be answered only by a DTI Minister, as the hon. Member for Kingswood (Roger Berry) made clear. They relate to the residue of funds made available through export credits guarantees in relation to the al-Yamamah deal. I do not see why the Minister cannot address those questions.

What I can say in general is that the ECGD is another arm of the Government that supports the defence industry, among a range of other customers. It operates on a break-even basis and charges sufficient premiums to cover its risks. The hon. Gentleman asked several follow-up questions about the response originally given by the Minister of Trade on 9 March 2006. I can simply confirm that the situation remains as set out in that response and I am unable to provide any further information, for the reasons stated then.

However, let me venture into other, very important territory, not least because the hon. Gentleman may want to intervene and congratulate the Government yet again. Export control is, by its very nature, an international activity. Controls stem from international agreements and the UK plays a key role in enhancing those agreements to meet the changing challenges in this area.

The Government have led calls for an international arms trade treaty, known as the ATT, to control transfers of conventional weapons. That is a cross-Government effort, and to this end the DTI is working with the Foreign and Commonwealth Office and other Departments that play a central role in export controls, notably the Ministry of Defence, but also the Department for International Development, to take that important initiative forward.

The precise content of the treaty will be a matter for negotiation, but as the former Foreign Secretary outlined in a speech in March 2005 on ATT, key elements that the UK would like to see in any treaty include the following: it should be legally binding; it should cover all conventional arms not just small arms; it should include core principles that make clear when transfers are unacceptable; and it should have effective monitoring and enforcement mechanisms.

Given the fine principles that the Minister has outlined, will he say whether he has any personal anxieties about the justification for his Department’s authorisation of the export of a military air traffic control system, which the United Nations’ own body said was not fit for purpose, to one of the most heavily indebted countries in the world?

I noted the hon. Gentleman’s remarks about the debate in Tanzania on that issue. It is a key partner in this matter and I welcome any debate in any nation about these important issues. With regard to our overall export control performance, we are doing very well in terms of how we administer it, targets and speed of dealing with applications. All the indicators are moving in the right direction. We have discussed that matter at the Quadripartite Committee and that is a notable success story of joined-up Government.

No doubt the hon. Gentleman would like to add to my congratulations to my colleagues on that success. I shall give him the opportunity to do so.

I am sorry, I cannot respond to the Minister’s jibing. He says that the UK is doing well on all the indicators. How are the Government doing with regard to export compliance and their investigations of corruption and bribery? Surely his Department must be aware that when it enters into such contracts, it endorses them, which raises questions about conventions and treaties that the Government have signed up to. What assessment have they made of that?

I have restated the Government’s absolute commitment to tackling bribery internationally. We are part of international agreements on that, but I simply repeat that the Attorney-General and others have dealt with the matter he raises: the discontinuance of the SFO inquiry. Because I am not the lead Minister on that matter, and because others have dealt with it, I cannot add to that statement, but that takes nothing away from our commitment to tackle bribery and corruption, and it takes nothing away from our commitment to develop international treaties to control arms sales in the manner I mentioned earlier, through the treaty we are seeking to develop.

It is relevant in the closing minute to say that many will already be aware that I shall be starting a review of the controls introduced in 2004 under the Export Control Act 2002. That has been timed to commence three years after the new export control legislation was implemented and it is a matter we shall discuss in Parliament, not least with the Quadripartite Committee. I look forward to engaging with colleagues on those issues in this most important area which, as we have seen during this interesting debate, properly excites much attention, and inevitably, much controversy.

Sitting suspended until half-past Two o’clock.