I beg to move,
That this House
notes the protests of citizens of Tanzania in a demonstration in Dar es Salaam on 20th January 2007 demanding the arrest of any wrongdoers involved in the sale of a radar system to Tanzania in 2001-02;
further notes that the Serious Fraud Office is investigating the propriety of the deal and allegations of corruption;
further notes that Tanzania is one of the poorest countries in the world and a leading recipient of British aid;
further notes that Tanzania borrowed to finance this deal, whilst simultaneously seeking and receiving debt relief;
calls upon the Government to explain whether adequate enquiries were made into the propriety of the deal at the time;
further calls upon the Government to explain why the views of the World Bank were not adequately considered in the process of deciding whether to issue an export licence, in breach of Criterion Eight of the Consolidated EU and National Arms Export Licensing Criteria;
and further calls upon the Government to explain why consent to the deal was forced through a divided Cabinet by the Prime Minister in the face of the opposition of the then Secretary of State for International Development, the Rt Hon Member for Birmingham, Ladywood.
Our purpose in calling tonight's debate is not only to hold the Prime Minister to account for his decision on this deal, but to help ensure that the mistakes made by the British Government in the handling of this issue do not happen again. I note that the Secretary of State for International Development refers in his amendment to new procedures, so I hope that he will spell out precisely in his reply how they would stop any recurrence of such events.
We are concerned that if those circumstances were to be repeated, there is little doubt that public support for the British international development agenda, which the Secretary of State and I hold dear, could be seriously eroded and undermined. I remind the House of the relevant facts. In 2001, the British Government were asked to consider applications for export licences for the sale to the Tanzanian Government of an air traffic control system. The system cost £28 million and the heavily indebted Tanzanian Government took on more debt to secure it. The International Civil Aviation Organisation said that the system was
"not adequate and too expensive for civil purposes".
The International Monetary Fund told the Prime Minister that it was very concerned about the impact of the purchase on Tanzania's external debt burden. The sale was opposed by leaders of Tanzanian civil society, who advised the Prime Minister that it was "too expensive" and "murky". In Britain, a wide spectrum of international development organisations were completely opposed to the deal. Oxfam said that the deal was "outrageous" and
"a complete waste of money".
Many in Britain felt that the money would be better used to tackle disease and to promote primary education.
As the right hon. Gentleman will well know, its replacement had the full support of this side of the House, so I do not see the relevance of that to the case that I am making.
The contract was opposed by the World Bank, which argued compellingly that the £28 million system was far "too expensive" and was outdated, and that a satisfactory system could have been secured for a fraction of the price.
I am delighted to assure the hon. Lady that we did. In order to ensure that I am fully informed about these points, I have taken a note of what my predecessors said. The former shadow Secretary of State for International Development said:
"At a time when Tanzania is not meeting its UN Targets on primary education and poverty reduction, an air traffic control scheme is the last thing they need."
My hon. Friend Tony Baldry said:
"It is pretty ludicrous to expect Tanzania to be spending £28 million on a military air traffic control system it does not need. There are perfectly good civilian air traffic control systems that would cost considerably less."
The answer to the hon. Lady is that, absolutely, we did make that clear.
Of particular significance is the fact that the sale was opposed by the then Secretary of State for International Development, Clare Short, who, according to The Guardian, said that the deal "stank". It is entirely clear that her role in this sorry saga was, throughout, beyond reproach. I pay tribute to the many officials at the Department for International Development who stuck their necks out to argue forcefully around Whitehall against the consents.
Is not the system for both civilian and military use in Tanzania? The hon. Gentleman says that the system is outdated, but is it not used in, I think, eight regional airports in the UK?
The hon. Gentleman may well be making an interesting point, but it is not relevant to the argument that we are exploring.
Despite the opposition of all the most informed, respected and qualified observers, approval for the licences was forced through a divided Cabinet by the Prime Minister. The licences were granted on
Those revelations have been greeted with outrage by ordinary people in Tanzania. On
"used to build classrooms and roads. Tanzanians must get angry that they have lost this money."
Just as those people are calling their Government to account, we should ask detailed questions of our Government about their role in this matter. The revelations raise serious questions about the depth of the scrutiny that was given to the deal when it was considered and the wisdom of the Government in making that decision. The matter should cause us to pause and think carefully about how we interact with Governments in developing countries and to what extent we can and should second guess their priorities if the British taxpayer is partly or wholly footing the bill.
Does the hon. Gentleman agree that what will distress the people of Tanzania greatly is the feeling that there is hypocrisy in the system and that there is a double standard? Similar allegations will be set aside when a friendly country such as Saudi Arabia is involved, but they will be pursued with energy by both Tory and Labour Front Benchers when a small African country is involved.
The hon. Lady makes an interesting point about Saudi Arabia, but that is not the subject of the debate.
The Tanzanian context of the deal cannot be ignored. Tanzania is one of the poorest countries in the world. In 2001, more than half the population lived in severe poverty. Life expectancy at birth was 45 years. Primary school enrolment was 67 per cent. Some 2 million people were living with HIV/AIDS. Tanzania had a national debt of $5.4 billion. It had recently received debt relief from the World Bank and the IMF through the initiative for heavily indebted poor countries. For a long time, Britain has been a major donor. In 2000-01, we gave £111 million—£35 million of which was in direct budget support. In handing over that money, British taxpayers wanted, and Tanzania needed, every possible penny to be spent on measures to promote development, such as building basic health and education systems and tackling killer diseases. According to Oxfam, £28 million could have provided basic health care for 2 million people or an education for 3.5 million children.
We now know that the issue provoked lively debate in the Cabinet. It is worth noting the powerful case that the then Secretary of State for International Development put forward. She rightly acknowledged that Tanzania could benefit from improved air traffic control, but many experts made it clear at the time that they thought that the dual military/civilian radar system that was sold was vastly overpriced. Despite the high price tag, the system would cover only a third of the country. According to the World Bank, a much cheaper and more suitable civilian system could be bought. Indeed, in a bid to be helpful it commissioned the International Civil Aviation Organisation to examine the suitability of the proposed system. On
"not adequate and too expensive".
That was sent to the then Secretary of State for International Development, the right hon. Member for Birmingham, Ladywood, who in turn distributed it among the Department of Trade and Industry, the Ministry of Defence and the Foreign Office. Despite those condemnatory initial findings, the Prime Minister did not wait to hear the results of the full ICAO report—he forced approval through the Cabinet.
I think that I am correct in saying that when the Select Committee asked the then Secretary of State for Trade and Industry she refused to allow her officials to come to give evidence to the Select Committee. That was rather depressing. One of the other depressing things is that the Select Committee was always told that the deal was the wish of the Tanzanian Government. That sends out some alarm signals for the future in relation to budget support. Having the concept of budget support and being told that the deal was what the Tanzanian Government wanted was almost like saying, "Well, there is no scrutiny because this is what the Government of Tanzania want."
My hon. Friend makes a good point about budgetary support. However, British aid has strengthened civil society in Tanzania, and that is one of the reasons why we are hearing such comments about the deal and why Tanzanian civil society is making representations.
Has my hon. Friend read reports that the Watchman air traffic control system that was sold to Tanzania had been built prior to Cabinet approval? If those reports are true, does he agree that that is one of the reasons why the deal was forced through the Cabinet?
My hon. Friend is right that there was a system of prior approval. I hope that the Secretary of State will tell us that that is one of the aspects of the procedure that has been tightened up since.
Many in Tanzania have remained outraged by our Prime Minister's casual approach. A letter from leading Tanzanian non-governmental organisations said:
"We ... are convinced that the radar is too expensive for Tanzania to afford, and that we do not have the military capacity to make good use of the equipment in question."
"We are thankful to the Bretton Woods Institutions for showing concern for the people of Tanzania by opposing the deal".
They called for a full public inquiry.
Above all, it was astonishing that the Government cast aside criterion 8 of the consolidated European Union and national arms export licensing criteria. I remind the House that the Prime Minister sent his Ministers scurrying throughout Europe to secure the criteria, which outline the things that a Government must take into account when deciding whether to issue an export licence.
Criterion 8 states that a Government must consider whether a proposed export would help or hamper the sustainable development of a recipient country. It explicitly states that decisions should be taken
"in the light of information from relevant sources such as" the World Bank and the IMF—the very organisations that condemned the deal. Why, when the consolidated criteria explicitly set out a requirement of consultation with bodies such as the World Bank and the IMF, did the Government not only pointedly ignore those bodies' recommendations, but grant the licence before the bodies had even had time to deliver their full conclusions? In the light of that, let us hear today why the British Government concluded that spending £28 million—more than a quarter of the value of UK aid to Tanzania—on an outdated and unsuitable radar system did not completely contradict the very guidelines that they had so warmly embraced?
Order. The hon. Gentleman should beware. We choose our words very carefully in the House. Perhaps he would like to rephrase that.
Is the hon. Gentleman suggesting that British aid was used to buy the system, or, indeed, that British aid should be cut as a result of the Tanzanian Government's decision to buy the system? Tanzania is achieving improvements against the millennium development goals, but that progress would be lost if we stopped giving it aid.
The hon. Gentleman knows very well that we have strongly supported giving British aid to Tanzania. However, it is right for the House to take account of the fact that the deal caused the Tanzanian Government to incur a debt of some £28 million. That debt must be paid back at the same time that the UK taxpayer is giving aid to Tanzania. Although the two payments are not directly related, I am making an important point about the way in which the debt was contracted, given the importance of having confidence in the system of budgetary support.
Given that the hon. Gentleman says that he, like me, opposes the deal, I am delighted that he has taken the trouble to come along to the debate. As I develop my case, his question will be very fully answered.
I am going to make a little progress.
If the Government argue that a judgment call was taken after lengthy consideration, will the Secretary of State explain why the Government acted without reference to the opinions of those best placed to comment? Will he explain whether the Government knew of the $12 million payment to a Swiss bank account when the export licences were granted? If the Government had known about that payment, would the export licences still have been granted?
Nearly two weeks ago, I tabled a named day question to the Prime Minister for answer on
When the Prime Minister was exercising his judgment on the matter, presumably he must have asked basic questions about the value of the export. Even if he did not do so, there were plenty of experts around at the time who were saying that the deal was grotesquely overpriced. All the warning signs of impropriety were there: a vastly inflated price, an unsuitable product and unorthodox financing. Does the Secretary of State accept that the Government made inadequate investigations into the propriety of the deal? Speaking in his capacity as the Government's anti-corruption Minister, does he accept that the situation represents a real failure and abdication of responsibility by the Government and the Prime Minister?
A recent IMF report says that its staff should have been "more firm in opposing" the radar deal. Will the Secretary of State express similar regret on behalf of the Government? The people in the Government of Tanzania who pushed through the deal must bear the chief responsibility for wasting their impoverished country's money. However, those people were aided and abetted by the British Prime Minister. As the Secretary of State knows, a partnership for development imposes both rights and responsibilities. If one pledges to be the champion of good government, one has a responsibility to act when one sees instances of bad governance.
In a moment.
"Personally, I always thought she had a point, as it was never clear why we should be encouraging the sale of expensive long-range military radar to a country which with another hat on we had judged to be so poor and so indebted that it needed special measures to keep its economy afloat."
"Clare is a formidable operator because she is so well briefed ... hats off to Clare, she reads all the telegrams and knows what is happening."
The Prime Minister apparently responded:
"Thanks, but I'll keep my hat on all the same."
I am grateful to the hon. Gentleman for finally giving way.
As the hon. Gentleman tries to understand how this scandalous deal came to occur and why the export licence was granted, does he share my concern about the apparently excessively close relationship between BAE Systems and the Prime Minister—and perhaps other members of the Government? Does he share my worry about the role of Barclays bank in financing the deal? We have never got to the bottom of why on earth it granted a concessional loan.
I hope that the hon. Gentleman will be able to make a speech because he has done an immense amount of work on the matter. I hope that he will forgive me if I focus specifically on the way in which the Government reached their conclusions, and especially on the role of the Prime Minister.
Like the Secretary of State, I celebrate the recent progress that has been made in Tanzania. I recognise the contribution that British support has made to that progress. However, that is not an excuse for this squalid episode. The Secretary of State is an honourable and decent man whom we respect. As he knows, Conservative Members support the principle of the international arms trade treaty to which the amendment refers. He is fair and open-minded. I was delighted that he said during last Wednesday's International Development questions that he was considering our proposal for an independent aid watchdog to provide impartial scrutiny of the effectiveness of British aid at reducing poverty. He and I share a commitment to tackling the scourge of corruption in the developing world. He recently starred in a DVD about corruption, produced by the Department for International Development, called "Crimes of the Establishment". At the time of the affair, he was the Parliamentary Under-Secretary of State for International Development, so perhaps he will tell the House whether, at the time, he sided with the Prime Minister or his departmental boss, the Secretary of State for International Development. I do not doubt that he will feel uncomfortable tonight in having to justify to the House the Government's decision to authorise that squalid deal.
We used this Opposition day to raise the subject because there are important wider questions at issue, including questions about policy coherence across Whitehall, and the strength of DFID's voice in battles with other Departments. The affair certainly raises questions about the Government's respect for the Bretton Woods institutions, and it challenges the Prime Minister's rhetoric on Africa and development. Just months before approving the deal, the Prime Minister said that Africa was
"a scar on the conscience of the world".
Events such as those under discussion threaten to undermine public support for development and aid. They make the Government's promise of an ethical foreign policy seem like hot air.
My hon. Friend is making inquiries and posing questions, but is the House to believe that this is merely the tip of a rather murky iceberg, and that we should be looking for evidence of other, similar deals?
Andrew George will forgive me if I say no more on that point.
It is no good the Government simultaneously negotiating debt relief, paid for by hard-working taxpayers, and allowing the Governments of poor countries irresponsibly to saddle their citizens with further illegitimate debt.
I am grateful to the hon. Gentleman for giving way once again. Is not the truly worrying and really reprehensible part of the whole sorry story the role of questionable third-party individuals and the payments into Swiss bank accounts?
The hon. Gentleman will know that that matter is currently before the Serious Fraud Office, which will no doubt report in due course.
It is profoundly unattractive to see the Government careering around the world signing high-minded anti- corruption declarations in international forums, while sanctioning questionable deals back in No. 10. We Opposition Members say that the deal was bad for Tanzania. It undermines public confidence in international development and should never have been agreed by the Prime Minister. Tonight, we look to the Secretary of State to assure the House and the international development community that such events should not, and will not, take place again.
I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
"notes that it would be inappropriate to comment on allegations of corruption in connection with the sale of a radar system to Tanzania in light of the current investigation by the Serious Fraud Office;
notes the great progress made by Tanzania since 2002 in achieving debt relief, poverty reduction and public service reform;
notes that the decision to grant an export licence for the air traffic control system was taken after due consideration of the Consolidated EU and National Arms Export Licensing Criteria;
acknowledges that that decision took place after full discussion at Cabinet level;
further notes that the UK subsequently established its own cross-Whitehall methodology for the assessment of applications against Criterion 8 of the consolidated criteria and was subsequently instrumental in establishing a shared methodology with its EU partners;
and further notes the Government's efforts to promote an International Arms Trade Treaty.".
I welcome this opportunity to respond to the speech of Mr. Mitchell, because the decision taken by the Tanzanian Government some eight years ago to buy an air traffic control radar system, the UK Government's decision to grant an export licence for it, and the basis for those decisions, raise important issues that the House will wish to explore, and we shall do so tonight.
I shall begin by setting out some of the history. In 1999, the Government of Tanzania signed a contract with BAE Systems for a combined civilian and military-use radar system. The following year, BAE applied for two export licences for the system. In February 2001, a World Bank report was released, which concluded that the system offered poor value for money and was unsuitable for Tanzania's needs. The World Bank subsequently asked the International Civil Aviation Organisation for a more detailed report. In November 2001, that ICAO report raised concerns about the project and recommended a further report. At the same time, Tanzania reached completion point under the heavily indebted poor countries initiative, and received $3 billion of debt relief, in a package from the World Bank and the International Monetary Fund. In December 2001, the export licence was approved by the Department of Trade and Industry—I shall come back to that point later.
In February 2002, the UK decided to withhold £10 million in budget support from Tanzania because of concerns about the purchase. In May, the second ICAO report raised further concerns about value for money and the balance between civilian and military use.
On that final report by the ICAO, there were many requests for it to be published at the time, but the Tanzanian Government refused. The British Government had sight of it, but as far as I am aware, it has never been published. Its conclusions were described to me by an official at the World Bank as a bombshell. Will the right hon. Gentleman do everything in his power to make sure that the report is now published?
I concur with what the hon. Gentleman says; as far as I am aware, the report has not been published, and the Government of Tanzania expressed their view, at the time, about whether it should be published or not. I am telling the House about what the report said. Its import was extremely clear, and I have just referred, in summary, to what it had to say.
In July 2002, the then Secretary of State for International Development, Clare Short, met President Mkapa, who outlined the steps taken by the Government of Tanzania to improve financial management, and at that point it was decided to continue to provide budget support. The sale went ahead and the system was installed. It continues to operate today, although the Government of Tanzania subsequently decided not to proceed with the purchase of the second phase of the system.
I know that I am referring to events that did not happen on his watch, but is the Secretary of State aware of the size of the Tanzanian air force? There are nine aeroplanes—six MiG-1s and three MiG-17s—and 10 Bell Huey helicopters. What on earth were the Government doing, giving export orders to Tanzania and selling it a civil/military-operation air traffic control system that it did not need, and that was four times too expensive, and four times larger than was required?
I bow to the hon. Gentleman's expert knowledge of the Tanzanian air force and its equipment, but I want to correct him on one point: the sale of the air traffic control system was made by BAE Systems. The Government's job was to take a decision on the licence—
Yes, the export licence. I shall come to that point in a moment. Secondly, the hon. Gentleman has to acknowledge that the decision to purchase the air traffic control system was made by the Government of Tanzania.
As I said to Norman Lamb—and I think that he was referring to the ICAO report, not the World Bank report, as Daniel Kawczynski says—my understanding is that the Government of Tanzania did not agree the publication of the ICAO report, and we should respect the view that they took on the subject at the time.
Does my right hon. Friend agree that the use of the radar system was not just military, as was implied earlier, but civilian, too? Today, the Tanzanian Government receive revenue from the use of the system.
My understanding is that that is the case—the Government of Tanzania receive revenue from the system, and certainly the system was a dual-use piece of equipment.
If I may, I shall just make a little progress, and then I shall happily give way again.
Finally, following allegations of corruption, the Serious Fraud Office, as the House is aware, initiated an investigation, which is still under way. The sale has been debated in the House; it has been examined by the Quadripartite Committee; it has been covered extensively in the media; and it was referred to in books by the late Robin Cook and by the right hon. Member for Birmingham, Ladywood. I want to address directly the concerns that have been expressed, which relate to three issues. First, how effectively was the export licensing process applied in this particular case, and how effective a process is it in general? Secondly, I want to deal with allegations of corruption and, thirdly, the impact that all of this has had on development in Tanzania.
The Secretary of State has rightly identified the key issues, but will he confirm whether he shared the concerns of many other people? I am not sure whether he was a junior Minister in the Department at the time, but did he share concerns about the grant of the export licence? It was abhorrent to most people that it was granted.
History is recorded by the participants, and there was a debate in the Government—it will not shock the House to learn that that was the case. As for the Department's view, the right hon. Member for Birmingham, Ladywood was Secretary of State at the time, and I was a loyal and supportive Under-Secretary when the Government made a decision about the licence. There was then a collective decision, which it was—and is—the duty of all members of the Government to support. The hon. Gentleman understands that extremely well. I want to deal with the licensing process, because the key issue is the application of criterion 8 on sustainable development.
The right hon. Gentleman has very nearly answered the question, reinforced by Norman Lamb, of which side he took in the debate. Will he confirm that he was against the granting of the consents at the time?
First, I have made my view clear and, secondly, I do not propose to give a blow-by-blow account, even for Mr. Mitchell, for whom I have the greatest respect, of the discussions that take place in all Governments, at all times, about all decisions that are reached. He knows that, and I know that.
May I tell the hon. Gentleman that his strictures—I listened carefully to what he had to say—sit uncomfortably with the Conservatives' record when they were in government? It would not be right to hold this debate without acknowledging that fact. How did his party apply criterion 8? The answer is that there was no criterion 8, because the previous Government did not have any published UK criteria for assessing licensing decisions, which is why one of the first acts of the Labour Government after their election in 1997 was to introduce those criteria. The right hon. Member for Birmingham, Ladywood introduced the International Development Act 2002 to protect our aid budget from costs such as the scandalous spending on the Pergau dam. A little humility on the hon. Gentleman's part is therefore required.
I am grateful to my right hon. Friend for giving way. Has a licence ever been refused because it breached criterion 8? In my view, that licence did so absolutely, but I understand that there has been some tidying-up in the Department. Has a licence ever been refused, because it breached criterion 8?
What is the Secretary of State's view of the so-called middlemen—Mr. Vithlani and Mr. Somaiya—who are rumoured to have paid up to $12 million into a Swiss bank account as part of the deal?
I am grateful to the Secretary of State. Will he confirm that in the murky world of international arms deals, 1 per cent. commission is generally regarded as appropriate, and the Export Credits Guarantee Department automatically regard any commission of more than 5 to 10 per cent. as ultra-questionable?
That is my understanding of the approach adopted by the ECGD, which was not involved, as the House will know, in this particular case. However, because those allegations were made about the deal, it is right and proper that they should be investigated.
Criterion 8 requires the Government to consider whether the export will
"seriously undermine the economy or seriously hamper the sustainable development of the recipient country".
The export licensing process also involves consideration of conflict, human rights and other issues, but criterion 8 is most relevant to this particular case. The Government take their responsibilities on arms export licensing very seriously, and they considered the application of the criterion carefully when the licence for the air traffic control system for Tanzania was considered. The issue was thoroughly discussed by the Departments involved and, in the end, the Secretary of State for Trade and Industry concluded that the licence should be approved. That is not to say that there were no concerns about the system and its suitability—there clearly were, as the World Bank and the ICAO reports made clear—but the test of criterion 8 is whether it is likely seriously to undermine the economy and sustainable development. The Government at the time judged that it would not do so and, looking back from this vantage point, it would be hard to argue that it did.
There is not a criterion requiring the applicant to be a fit and proper person to hold a licence, but operative provision 10 of the EU code of conduct allows the Government to take other factors into account. In the light of what has been revealed about the general working practices of BAE Systems in a number of recent cases, is it still the Government's view that BAE is an appropriate recipient of a licence?
Every licence application, as the hon. Gentleman will be aware, is considered on its merits at the time. If the Government operated any other system we would be rightly criticised. Each licence has to be considered on its own merits.
The Secretary of State said that such a deal would not impinge dramatically on the economy of Tanzania, but that is not correct. The country's entire gross domestic product is only $10 billion, so £28 million is a huge sum. If we spent that percentage of our economy overnight on such a project it would have serious ramifications for the economy.
In the end, a judgment has to be made and, if the hon. Gentleman will bear with me, I shall return to the assessment of the impact and the progress that Tanzania has been able to make since then.
With respect, the Secretary of State dealt with the second and third aspects of criterion 8, but the first aspect states that the purchase should involve
"the least diversion of human and economic resources" to armaments or, in this case, military equipment. It can scarcely be said that the least diversion was made if it was four times as much as was required to fulfil the country's needs.
I am very well aware of what the criterion says, but I hope that the right hon. Gentleman accepts that the Government had to make a judgment about licensing decisions.
It is worth bearing in mind that the decision to purchase the equipment was made by the Tanzanian Government. Foreign Minister Kikwete at the time said:
"Our engineers prescribed the system which we required. We put the contract out to tender, four companies competed and we got BAe Systems delivering to our specification. This is the system we wanted."
The Tanzania case did highlight a number of issues.
The argument is that criterion 8 should have ruled out the sale of the system because it seriously hampers the sustainable development of the country. I would argue that for a country heavily in debt, that must be the case, but if the right hon. Gentleman argues to the contrary, is he saying that criterion 8 needs to be amended? Surely the conclusion must be that it is wrong to grant an export licence for the sale of an inappropriate system that was not fit for purpose.
Criterion 8 does not exactly say that. There will be an opportunity to review the Export Control Act 2002 during the year, and the House has the opportunity this evening to debate the issue, as we are doing. We should always reflect on experience. In the end, the Government weighed these matters up and reached a view that the test in criterion 8 was not met. However, there are lessons to be learned, and I shall come on to those. I know that many Members are anxious to speak and I should like to make progress.
First, there was a need for clearer guidance within Whitehall. We have now agreed guidance for officials when they look at the impact of proposed arms exports on a recipient country. The principle that sustainable development must be taken into account in licensing decisions was enshrined in the Export Control Act 2002, which is one of the toughest licensing systems in the world. The House should recognise that. DFID continues to play an active part in the licensing process. The Export Control Act is due for review this year. The Department of Trade and Industry will lead the process, consulting widely with other Departments, Parliament and civil society. One important area that we will look at is the activities of arms brokers, how well the current controls are working and whether they need to be strengthened.
The second question that we need to ask ourselves is how we continue to ensure, as a major exporter of defence equipment and as a major international donor, that UK arms exports do not undermine development. That is what we are concerned about. We know that excessive spending on arms can divert money away from health and education, and irresponsible transfers can be used to ignite violence.
Nevertheless, all countries have a right to provide for their legitimate defence and security needs, and those of their citizens. For that they need suitable equipment, and few developing countries have the means to manufacture that equipment. Most are dependent on arms imports. In the circumstances, what we can do is to have the right framework for taking decisions about UK licensing decisions, but to recognise that that is not good enough if other countries do not follow the same approach. That is why the UK has been leading the campaign for an international agreement, in the shape of an arms trade treaty, which would benefit everyone and which would also have the power to stop arms transfers that fuel violent conflict, particularly in the world's poorest countries.
I turn to the second area of concern: corruption.
As the hon. Gentleman knows, extra-territoriality currently applies to certain brokering activities abroad relating—from memory—to weapons of mass destruction, instruments of torture and brokering that contravenes international arms embargoes. At the time we said that we wanted to see how the new arrangements worked. Part of the purpose of the review of the legislation is to give the House the opportunity to reflect on that. If the world did more to control the flow of small arms and light weapons, which are principally responsible for the terrible death toll in developing countries, I am sure the whole House would welcome that.
On the allegations of corruption, I am, of course, aware of them but as I said, I cannot comment on the details of an ongoing SFO inquiry. However, I can assure the House that the Government are co-operating fully, and that the Tanzanian authorities have also extended full co-operation, indicating their seriousness in trying to combat corruption.
As in many low income countries, there is corruption in Tanzania, but progress has been made in combating it and in improving accountability. Tanzania is currently one of the top rated low income countries in the World Bank's country policy and institutional assessment, and Tanzanians surveyed in 2006 felt that corruption in their country was declining.
The right hon. Gentleman has said in the past that where there is corruption—I cannot quote his words exactly—there is someone who accepts the bribe and a party that offers the bribe, who is equally culpable. Does he agree that any instance where the UK Government are seen to accept corruption by the briber undermines any attempt to deal with corruption in any country?
We do not accept corruption. That is the very reason that we passed legislation—not legislation that we found on the statute book in 1997 when we came into office—to make bribing a foreign official a criminal offence in this country.
How would the right hon. Gentleman react to the recent comments from President Mbeki of South Africa, who alleges that we have been involved in corruption, so we are on a less sound footing for having a go at African countries that are involved in corruption?
I do not know who the hon. Gentleman means when he says "we", but if he is talking about the Government, I emphatically reject the charge that has been made. What I would say to people who have made comment—I must be careful here, in view of the strictures on referring to it—is that one decision in relation to one case does not make a Government policy. In a moment I shall point out some of the things that we are doing to tackle the problem of corruption arising out of the legislation that we have passed.
I am grateful to my right hon. Friend. Does he agree that there is confusion about the Government's role, and that some hon. Members think that the Government were involved in the negotiation of the deal between the Tanzanian Government and BAE Systems? The role of the Government was to grant the export licence.
My hon. Friend is right. As I explained to the House, that was indeed the role of the Government. The decision to purchase was the Government of Tanzania's. The decision to sell was BAE's.
The hon. Member for Sutton Coldfield rightly drew attention to the impact of an increasingly independent media in Tanzania, which has highlighted a number of alleged cases. That will see the fight against corruption in Tanzania intensify and gather pace in 2007. The Government of Tanzania will table new, strengthened anti-corruption legislation before the next Session of Parliament. Parliament is also considering a draft Freedom of Information Act.
The Government of Tanzania have just launched the second phase of their national anti-corruption strategy. That sits alongside the public sector reforms currently under way, which President Kikwete spoke about during his recent visit, and which have steadily improved the accountability of Government and the services that they provide to their citizens. These reforms are supported by DFID. I pay tribute to the right hon. Member for Birmingham, Ladywood for her work in that regard.
Reforms include public service pay reform, streamlining planning and budgeting, and increasing accountability. Tax reforms have increased revenue in Tanzania. It is encouraging that Tanzania has managed to lift tax revenues from 11 per cent. of gross domestic product in 2000 to 14 per cent. in 2005. Public financial management reform has improved expenditure control, allocating resources to sectors in line with national plans, and strengthening auditing and procurement. That reduces opportunities for corrupt practice.
I shall make progress. I have been generous in giving way.
Reforming procurement is particularly important in a case such as the one under discussion. The solution to concerns about the suitability of equipment, value for money, affordability or potential corruption is for countries to have sufficient capacity and their own procedures in place to deal with these matters themselves. That is the solution. In the case of Tanzania, these reforms are important individually, but they also complement one another in bringing about a transformation of the public service as a whole—one that is better able to deliver for citizens and in which the Government are held to account. In Tanzania, we are seeing increasing demands from citizens in rural areas for greater sanctions against local officials who misuse resources. We are seeing demands for schools, clinics, water and roads. We have seen increased public demand for accountability. The hon. Member for Sutton Coldfield mentioned the recent demonstration about the radar purchase, in particular, that was organised by Opposition parties in Dar es Salaam. The media have covered the issue, and civil society has added its voice to calls for a thorough investigation. All that demonstrates that in the case of Tanzania, pressure to investigate allegations of corruption in such cases is domestic as well as international. We should welcome that.
On international action, the UK has ratified the UN convention against corruption and promoted the very successful extractive industries transparency initiative. We are setting up the governance and transparency fund to help those working to improve transparency, we have established the international corruption group, and we are taking on additional police officers working with the City of London and Metropolitan police. Why? It is to increase our capacity to investigate bribery, corruption and money laundering.
Are not the Government in danger of losing some of their legitimacy in lecturing African countries about corruption when the Prime Minister's own chief fundraiser is being questioned about perverting the course of justice?
We have also had some successes. In one case, we returned funds to Nigeria that were brought into the UK in a suitcase. In another, thanks to the legislation that we put on to the statute book and the swift work of the police, to whom I pay tribute, in freezing assets that had been purchased with money that had come from Nigeria, the courts ruled just before Christmas that some of those assets could be sold so that the funds could be returned to the people of Nigeria.
I want to turn to the impact of all this on Tanzania. While the concerns about the cost of the system were not sufficient to warrant refusal of the licence under criterion 8, as a donor we were concerned about the wisdom of the purchase and expressed those concerns to the Tanzanian Government, particularly as regards governance and financial management. It was the right hon. Member for Birmingham, Ladywood who did so. Having discussed all this with the Government, and having received assurances that they would not proceed with purchase of the second phase of the system, we continued with our aid programme. UK aid to Tanzania has doubled from £60 million to £120 million over the past four years and will continue to increase in future.
With the help of aid from Britain and other donors, Tanzania has made very impressive progress in its efforts to reduce poverty in recent years. Spending on health and education has increased significantly, and spending on defence as a proportion of the Government's budget has declined. Dependence on donors has fallen from 49 per cent. of the Government's budget in 2005-06 to just 41 per cent. this year. Picking up the points made by the hon. Member for Sutton Coldfield about the difference that our development programme makes, we are seeing results. There are 8 million children in primary school in Tanzania today—up from 4 million in 2000. The goal of universal primary education is within touching distance, with an enrolment rate of 96 per cent. Infant mortality, which was stubbornly high in the 1990s, fell by a third in the five years to 2004. Child malnutrition has fallen. Malaria treatment and prevention has improved, and immunisation rates are high. Of course, there is much still to do, but there has been real progress in improving the lives of poor people.
I have tried to set out the background to the case and the process by which decisions were taken at the time. There are lessons to be learned, and the review of the 2002 Act will allow us to do so. But in the end, the real solution, as we set out in the White Paper, is for us to work with developing countries to enable them to take the right decisions. These decisions should be taken by those who are ultimately responsible—the Governments and peoples of the countries themselves.
Liberal Democrat Members welcome this important debate on the sale of a radar system to Tanzania. There is a stench arising from this deal, just as there is from the al-Yamamah contract. Strangely, however, the Conservatives make no mention in their motion of BAE Systems as the alleged briber. The motion is narrowly defined and seems to seek to confine the debate to Tanzania. I have to assume that that is to avoid their hopelessly compromised position on the Saudi Arabian case.
The hon. Lady has made the very serious accusation that BAE Systems has used bribery. Is she going to produce some evidence of that in the course of the debate or leave it to the police?
I thank the right hon. Lady for that very helpful intervention. I was being careful with my words but now, thanks to her, I can perhaps drop the "alleged".
First, I wish to put on the record the extraordinary work of my hon. Friend Norman Lamb, whose pursuit of these matters has shone a light into what appears to be an extremely murky world. In an Adjournment debate on
There is a moral imperative here. If we are to retain any influence, reputation or credibility in world affairs, we must be squeaky clean ourselves. Despite the Secretary of State's defence of the decision to grant an export licence, somewhere between the Government, BAE and Barclays—perhaps all three—our reputation worldwide has been left in tatters. How can we tell other countries to live up to their obligations when $12 million lies in a Swiss bank account as testimony to corruption and bribery in those deals?
At this particular time in history, when the world is moving, albeit slowly and painfully—as are we, as the Secretary of State said—to tackle defence contract corruption and is striving to introduce transparency, it is vital that the Government answer to their part in what seems to be a very nasty business. While the Serious Fraud Office must pursue its investigations without fear or favour, it is also right that these matters should come before this House.
The SFO obviously has to work within the code of practice of Crown prosecutors, which allows for the abandonment of cases in the national interest. Does the hon. Lady think that the national interest is less likely to be cited in cases involving countries with a national income per head of $400 a year than in countries with a national income per head of about £12,000 a year, as can be the case in oil-rich regimes such as Saudi Arabia?
Order. I sense a tendency to move further from the bounds of the motion, which the hon. Lady herself said has been expressed in narrow terms. That being said, that is the motion before the House.
David Taylor made a valid and interesting point.
There are three strands to this scandal that I want the Government to account for tonight. The Secretary of State covered some of the ground, but not all. The first concerns the supply of a military air traffic system to one of the poorest countries in the world. One thing that the Secretary of State did not mention was whether he had had discussions with Tanzania as to the fact that only one third of the country would be covered by the system that it was purchasing. The system has been widely criticised, so I want the Government to clarify what questions they asked about the supply of such a system to the poorest of poor countries—as other hon. Members have said, a country to which we were sending aid. Was the actual need for a system discussed? Did the Government advise the Tanzanian Government about the appropriateness of such a system?
Secondly, the allegations of corruption about the sale need to be tackled more thoroughly. The investigation into the air traffic control contract in Tanzania raises questions about the Government's integrity. Granting an export licence for the military air traffic control system is a scandal. Selling such a system, which costs millions of dollars, to one of the most heavily indebted countries is also a scandal. The Tanzanian air traffic control system deal flies in the face of all that we claim that we want to achieve in aiding poor countries.
One part of the Government has been providing debt relief on the ground that Tanzania's debt was unsustainable, while another part of the Government appeared to encourage the same country to take on £28 million of debt for an air traffic control system that did not work for a military area that covers only one third of the country.
"If it is to be used primarily for civil air traffic control, the system is not adequate and is too expensive."
What comprised the Tanzanian air force? As we have heard, it is small. How many military planes did it have? Did the Government ask that question at the time? Were the Government aware of a disparity between the size and sophistication of the system that Tanzania was purchasing and its needs? Even if the Tanzanian Government needed the system, were discussions held in which our Government pointed out that it was not the most appropriate system?
"Somehow, a loan from Barclays bank, which is funding the project—there is no way that Barclays can provide concessional funding—has been reported to the IMF as being concessional, so the project squeaked through, which is very odd."—[ Hansard, 15 May 2002; Vol. 385, c. 763.]
If that was the case, surely it was fraud. In 2002, my hon. Friend the Member for North Norfolk referred to "being told" that bungs were paid to oil the wheels of the deal; we now know that there were $12 million bungs. What did the Government know? Did they know anything about it? Did they know at the time? If not, when did they know?
The Government have tried to assure us time and again, and stated that they promote responsible business conduct. Only last Wednesday, in answer to my hon. Friend Martin Horwood, the Secretary of State for International Development spoke about the UK anti-corruption plan, and how the Government intend to promote responsible business conduct in developing countries and support international efforts to fight corruption. I am sure that hon. Members of all parties would support that.
Moreover—and astonishingly—the Secretary of State, as champion of combating corruption, stated that he was not consulted about the decision to drop the investigation into BAE and the deal in Saudi Arabia. Will he be consulted about the issues that surround the Tanzanian deal? The Secretary of State replied on Wednesday that he thought the case had no relevance to DFID, but the Department's White Paper, "Making governance work for the poor", makes it extremely clear that it has.
Of course the BAE Eurofighter sale, which we are not discussing this evening, has a strong connection with the sale of a radar system to Tanzania because both appear to come from the same questionable background. Both issues have a connection to DFID. Has the Secretary of State for International Development been consulted about the Tanzanian case? What was discussed with DFID about supplying such an extravagant system to a country into which we were and are still pouring aid? What role will DFID play in the investigation?
The whole mess runs the risk of undermining the Prime Minister's commitment to poverty reduction in Africa. Corruption is a key element in economic underperformance and a major obstacle to development and alleviating poverty. The Secretary of State said:
"Good governance is about ensuring the rule of law... Bad governance can be caused or made worse by the actions of rich countries and their companies. For every bribe taken - there has to be a bribe giver; for every stolen dollar that is spirited out of a developing country, there has to be a bank account somewhere for it to go into."—[ Hansard, 26 October 2006; Vol. 450, c. 1738-9.]
We now know where the account is—Switzerland.
The diversion of funds through corrupt practices undermines attempts by Tanzanians to achieve higher levels of economic, social, and environmental welfare. Although I welcome the Secretary of State's comments about improvements in Tanzania, we must be above suspicion in our dealings. A key plank in our international development strategy must be combating corruption overseas. We are already bound by the United Nations convention against corruption and the OECD convention on combating bribery of foreign public officials in international business transactions. We encourage other countries to adopt and enforce those laws. We need to encourage our Government to implement them.
The modus operandi of BAE Systems and its predecessor companies in Tanzania, South Africa, Chile or Saudi Arabia consistently appears to go against the principles in those international conventions. The DFID White Paper states that corruption damages economic growth by increasing the cost of doing business. It siphons off resources that should go into public services and undermines the accountability of political leaders and officials to their citizens.
The Attorney-General ran a coach and horses through those rightly high aspirations when he decided to stop the investigation. The example of BAE in Tanzania shows that the Government are preaching, but perhaps not practising what they preach. Did No.10 force the licence for the Tanzania deal through the Cabinet, as has been reported? That is a crucial question.
Thirdly, let us consider the investigation by the Serious Fraud Office, which should be commended on its determination to investigate the sale of a military air traffic control system to Tanzania. It is extraordinary to Liberal Democrat Members that that export licence was granted. How can we tell other countries to live up to their obligations when our name is being dragged through the international mud? To do so would be rank hypocrisy.
No, I shall not because hon. Members of all parties wish to speak.
The Serious Fraud Office must now be free to investigate. We must restore decency and transparency to Government. Lord Goldsmith stated last week that he told the director of the Serious Fraud Office that he should vigorously pursue current investigations, including several other cases against BAE. He also assured the House of Lords:
"We need to do all that we can to make sure that he has the resources in order to do so."—[ Hansard, House of Lords, 18 January 2007; Vol. 688, c. 779.]
We need to erase the stain on our reputation. Apart from our continuing loss of the moral high ground, it damages our reputation and ability to attract business. Let us hope that the Government and the investigation will eventually enable us, once again, to be looked up to as an example of good practice and good behaviour.
This is an interesting debate. It is the first time ever that I can recall the Conservatives asking for time to debate arms export policy. However, they are a little out of date in selecting a topic that was a matter of debate in other quarters five years ago. I know the views of some of the Conservative defence team, because they have served on the Quadripartite Committee, and if they heard some of the comments made here tonight, they would not be too pleased.
I want to focus on the serious matter before the House. I have served as Chair of the Quadripartite Committee since 2001. The first report that we produced, in July 2002, looked in detail at the specific case of the export of military air traffic control systems to Tanzania, and the implications of the case in relation to the application of criterion 8. Mr. Mitchell clearly drew on that report in his speech. I want to concentrate on those two issues.
I do not believe that the House ought to speculate on the outcome of the Serious Fraud Office investigation. My view has always been that all such investigations should be allowed to continue their course until the appropriate time when a decision is made whether to prosecute or not. I am sorry that certain hon. Members have speculated wildly in the debate about matters that we cannot resolve here tonight. Nor should we try to do so; let us concentrate on Government policy. That is the purpose of Opposition day debates, and this one is about Tanzania and criterion 8.
I shall not repeat at length the points that have already been raised in relation to these matters, but I want to tell the House how the Quadripartite Committee felt about the issues, which we discussed at some length. We identified a number of causes for concern. Personally, I was not convinced by the wisdom of the Government's decision, but I want accurately to reflect the specific concerns that were raised, and the Committee's final view. Our report stated:
"In...November 2001, the International Civil Aviation Organisation told the World Bank that the proposed export would not be adequate for civil air traffic control purposes, and was too expensive for Tanzania's needs."
The World Bank, prior to approving HIPC—heavily indebted poor countries—debt relief for Tanzania in that same month, noted that Tanzania had undertaken to reconsider the suitability of the air traffic control system.
Criterion 8 requires the Government specifically to take into account information from the World Bank. Our Committee therefore made the obvious comment, that
"it is not at all clear why a decision on the licence application was made on
The criticism there is clear: there were ongoing discussions involving the World Bank about the system, and the decisions to grant the two licences were made before there had been time to consider the outcome of those discussions.
When the Government gave evidence to the Committee, reference was made to the fact that Tanzania was, self-evidently, a sovereign state. The point was made that it therefore had the right to decide what air traffic control system it wanted to buy. That is absolutely true, but the debate is not about what system it should or should not buy. That has nothing to do with us. The question is: what military air traffic control system we should or should not license for export? That is our decision, and that is why criterion 8 exists. Why would criterion 8 exist in the first place, if the European Union did not feel that it should take into account the impact of such decisions on sustainable development, notwithstanding the fact that Tanzania is a sovereign state that has the right to buy whatever equipment it can?
A third criticism—and the final one that I shall mention, given the time—is that when the Quadripartite Committee investigated this matter, we were assured that a serious cost-benefit analysis had been undertaken. We asked the Government for a copy of it on
"The Committee's letter of
"It has concluded that it would not be possible to provide the Committee with a meaningful and balanced summary of the analysis that protected the commercial confidence of other parties, and which did not at the same time risk harming the frankness and candour of internal discussion. Such information is exempt from disclosure under Exemptions 2 and 13 of the Code of Practice on Access to Government Information...the Government considers that the Code of Practice does apply to the provision of information to Select Committees."
That raises some important Select Committee issues. Members of the Quadripartite Committee can see, in strictest confidence and restricted circumstances, end-user certificates for all arms applications, however sensitive. There has been no breach of that security. We were told, however, that we could not see the cost-benefit analysis on which the decision to grant the licence was based, and that the code of practice on Government information does not apply to Select Committees. We cannot understand that, and I will continue to pursue that matter.
The issue goes beyond the specific decision to how Committees can scrutinise such decisions. The Quadripartite Committee has previously raised the issue of prior scrutiny of decisions—scrutinising decisions before they are formally made. We were told that we could not do that and that it would not be right, as the Executive must make the final decision. Of course the Executive must make the final decision, but the entire media were engaged in that debate: it was no great secret that Clare Short had a different view from that of the Government. Everyone was discussing the issue, but the Quadripartite Committee, which was set up by the House to scrutinise arms exports, was not allowed prior scrutiny, which might have been helpful in ensuring that a sensible decision was made.
Having said that, the Committee concluded—this is my final quotation, but it is important for the record—that,
"we must recognise that assessments in terms of Criterion Eight are about whether the proposed export has the potential seriously to hamper sustainable development in the recipient country or seriously undermine its economy, rather than about whether it is supportive of sustainable development."
That is not a distinction that many Members have made this evening. The Committee continued:
"Although there was a clear prima facie case for considering the application under Criterion Eight, we accept that the decision to allow the licence was a 'judgement call'"—
I think I heard that earlier this evening, so somebody has been reading this carefully—
"and that it was reached after careful and prolonged consideration."
Although I think that that was the wrong decision, I must inform the House that not only all Labour Members, but all Liberal Democrat and Conservative Members on the Quadripartite Committee unanimously signed up to that statement that the decision was a "judgement call", and that it was reached after "careful and prolonged consideration".
It seems to me—and this is very much an issue for the Secretary of State as well—that if the contract did not breach criterion 8, criterion 8 is not worth having. There is no question but that the decision damaged the development of Tanzania, and if the provision can be read in a way that allows such a decision through, it needs rewriting. Does the hon. Gentleman agree?
I believe that the matter needs to be revisited seriously, and I want to deal with that now.
The Government's amendment to the Opposition motion refers to developing a "methodology" for dealing with criterion 8 issues. I would be grateful if my hon. Friend the Minister were to comment further on that in his reply. I am aware of the user guide and that the UK Government have again played a leading role in the European Union on the issue. I have read the user guide, which provides some helpful ideas about how to apply criterion 8, but I would not go as far as to call it a "methodology". When we review the export control Acts and continue to debate criterion 8, I hope that further time can be given to that issue. If there is a methodology, and I have missed it, I would be grateful if my right hon. Friend the Secretary of State ensured that we see a copy at some stage.
The right hon. Member for Birmingham, Ladywood asked how many times criterion 8 has been used to reject an export licence application by the UK. The answer is once, as my right hon. Friend the Secretary of State said. That raises an interesting question: why, since 2003, have the French Government refused 42 applications on criterion 8 grounds, while we have refused one?
Before speculation becomes rife in the Chamber, let us consider that important question. When a licence is refused, a denial notification must be circulated among the other European Union member states. Given that if France refuses a licence a denial notification must be circulated among the other EU members, the Government presumably know on what grounds it has refused licences on 42 occasions applying criterion 8 grounds. I should be grateful if they could tell us that at some stage, and also tell us why the United Kingdom has refused only on one occasion.
I have referred to the user guide which currently provides best practice for the interpretation of criterion 8. In fairness, it should be said that that was initiated by the United Kingdom presidency. Does the United Kingdom follow the best practice in that user guide, and what difference has it made? Why does the guide state that the guidelines
"are intended to share best practice in the interpretation of Criterion 8... Member states are fully entitled to apply their own interpretations"?
I believe that criterion 8 is at the heart of the matter. This evening Members have tried to roll together newspaper information about alleged bribery and corruption, criterion 8, Tanzania and all sorts of stuff, but there are distinct issues, and the issue of criterion 8 is fundamental.
I support what the hon. Gentleman has said about prior scrutiny. I understand that it still applies in Sweden and is no impediment to Swedish arms sales, and I therefore see no reason why the hon. Gentleman's Committee should not have prior scrutiny rights.
The hon. Gentleman will now have time to make the rest of his speech.
Time? Ah, I see. [Hon. Members: "You now have two minutes."] Forgive me, Mr. Deputy Speaker: I am very slow.
When the Quadripartite Committee has discussed prior scrutiny, we have not considered it to be our job to look at every licence application. What we have said is that when uniquely sensitive issues, particularly issues such as this, are in the public domain and there is public debate, it would be helpful if a joint Select Committee set up by the House to investigate were allowed to engage in such examination.
Order. I shall have to suggest to the hon. Gentleman that he conclude his speech now. There was a slight glitch with the clocks, and despite the device employed by Mr. Heath, he is working according to my time and has clearly used his full entitlement.
I begin by declaring an interest. I shall shortly go to Tanzania as chairman of the globalisation and global poverty group to discuss development issues, including issues such as this, with Government officials and others, and to address the Democratic Union of Africa.
Tanzania is one of the poorest countries in the world. I had the privilege of living there when I worked for the east African common market some years ago, and I know it to be a beautiful country with a warm people—but a people living under a cloud of poverty, disease and hunger that few of us in the House can imagine. We should remember, however, that it is in that context that we are discussing this issue.
The House often discusses waste and misuse of money that occurs in this country, but that waste and misuse dents, at most, our prosperity. Waste and embezzlement of money in a country like Tanzania is a matter of life and death. It means diseases untreated, education forgone, and children going to bed hungry at night.
That is why the accusations that have been made are so important, including those that Clare Short made outside the House and which we look forward to hearing today. I pay tribute to her because she does not speak now with the benefit of hindsight, as is the case for some of us, but she had the courage and foresight to speak out about her concerns at the time, and to make them known publicly.
I also have enormous respect for the right hon. Lady's successor, the current Secretary of State for International Development. He is a man of sea-green sincerity and absolute dedication to the cause of alleviating poverty. Today he responded with great candour, and coped with the embarrassing task of defending decisions for which he was not responsible, which he knows to be indefensible, and with which he undoubtedly disagreed at the time. I do not blame him for seeking what refuge he could find behind the investigation by the Serious Fraud Office. However, that will not stop us debating the issue today, because we are asking not about that SFO investigation, but about the Government's failure to investigate sufficiently, or act effectively upon, what they knew previously.
An even flimsier defence is just to say, as the Government amendment does, that the decision was made after "due consideration" and
"full discussion at Cabinet level".
The issue is not whether it was discussed, but what conclusions were reached and why. Why did the Cabinet disregard the advice of the International Civil Aviation Organisation, ignore the concerns of the then Secretary of State, and push through licence approval before the World Bank had put its well-known criticisms into a recommendation that would have been difficult to reject?
We know that Ministers did not conclude that this was a good deal for Tanzania. The ICAO had already advised that
"The system, as contracted, is primarily a military system...If it is to be used primarily for civil air traffic control purposes, the proposed system is not adequate and is too expensive."
At no stage has any Minister suggested otherwise. They have fallen back on what might be called the Pontius Pilate defence: "We knew it was a bad deal, and we suspected it was a dodgy deal, but we washed our hands of it and left it to the Tanzanians to decide"—the "sovereign decision" argument to which Roger Berry referred—"It's just too bad if the Tanzanians are being ripped off and the poor lose out as a result."
I am certainly not accusing the Secretary of State of taking that position. He would be the last person to argue that we should turn a blind eye to bad governance and waste of resources. His recent White Paper is entitled not "Let's hope governance will work for the poor", but "Eliminating World Poverty: making governance work for the poor"—making it work for the poor, not for the big man in Africa or big business abroad. The White Paper is robust about aid being made conditional on good governance. It says:
"The UK Government has a responsibility to make sure that UK aid money is used for the purpose for which it is intended. We take this very seriously."
In 2001, Britain had just given Tanzania £35 million of direct budget support for poverty reduction, yet when Tanzania decided to spend £28 million on a contract that the ICAO said was primarily military, not adequate and too expensive, the Government simply washed their hands. Governments face a difficult dilemma if the only way in which they can react to waste and suspicions of corruption is by cutting off further aid intended to help reduce poverty, but on this occasion we could have prevented this dubious contract by refusing or at least delaying a licence, without cutting off future aid.
The Secretary of State's White Paper goes on to say that donor Governments
"need to be able to stop unscrupulous individuals or companies profiting from...paying bribes" , and that
"where domestic capacity is weak, international codes of practice can encourage companies to work legitimately".
Yet instead of enforcing the combined European Union and national code of conduct on military exports, the Government simply glossed over it, or gave it the most liberal interpretation possible.
The Government say that they had no evidence of corruption when the licence was given. We now know, of course, that 30 per cent. of the contract value was paid into a Swiss bank account, but the Government do not want us to talk about that now that we have some evidence. However, we do have the right to know whether Ministers asked themselves the obvious question at the time: why were the Tanzanians pressing ahead with a contract for something that they did not need and could have got cheaper elsewhere, and for which they had arranged some highly questionable finance—all against the advice of the ICAO, the World Bank, the International Monetary Fund and others? We know that the former Secretary of State asked herself that question, and that she reached the only conceivable answer: that someone had been offered big kick-backs. The deal stank—it reeked of corruption—but the Prime Minister persuaded other Ministers to hold their noses and let it through.
We in this country talk a lot about governance. We lecture the Governments of developing countries, telling them that they must investigate, be transparent and hold Ministers to account, but the sad truth is that on this occasion, the suspicions fell on a British company. It was British Ministers who turned a blind eye; it was the British Government who rushed a decision through before the World Bank could publish its report; it was the British Government who ignored their own code of conduct. The words "mote" and "beam" spring to mind.
Last year, I met one of the bravest men in Africa: John Githongo, the former anti-corruption tsar in Kenya, who tenaciously exposed massive corruption in the face of threats to his life and family. He said that Britain could still exert considerable moral influence—that anything that we did to highlight corruption and abuse would mobilise and strengthen the forces within African countries trying to clean up their systems. The sad truth is that this whole sorry episode will make it more difficult for the Secretary of State to exert that moral influence. I suspect that he would agree with me, were he in a position to do so.
Although tomorrow's headlines will be captured by "cash for honours", I believe that the episode that we are discussing today will leave a darker stain on this Government's reputation. They put the well-being of poor people second to the interests of big business, undermined Britain's influence for good and set a damaging precedent for the future. The stain can be erased only if this House is prepared to do what we demand of others—may I respectfully suggest that it do so through its Select Committee on International Development?—and render the dealings of Government thoroughly transparent and hold Ministers, above all the Prime Minister, to account. It will be to the credit neither of this House nor this country if we let the matter rest as it stands.
I sense that we are short of time, and given that many Members want to speak, I shall curtail my remarks. I shall avoid party political point scoring, try to avoid discussing the issue under investigation, and try not to upset my right hon. Friend the Secretary of State, if possible.
As has been said tonight, the system cost £28 million, and many Members felt that the money could have been better spent. That is undoubtedly so; however, I do not come to this debate with clean hands. If I had wanted a job in which I could keep my hands clean, I would have worked in a laundry. We are working in politics, and on occasion, we must do things for the greater good. Such an attitude is sometimes lacking in this Chamber; instead, Members occasionally hawk their consciences around this place.
A military system was not needed. We can say from this vantage point that a civil system could have been used, and provided at a lower price. However, and as the Secretary of State told us, we are dealing with an independent sovereign country. We might, and should, try to influence its decisions, and to do that we sometimes have to get a bit close—perhaps close enough to influence the take-up of the second phase.
In looking into this situation, I dug out some information on the needs of Tanzania, which is surrounded by eight neighbours. The figures that we have been given tonight for the air force conflict with those that I received this afternoon. Tanzania has 29 combat aircraft, one transport squadron, two training squadrons, two helicopter squadrons, four air bases and 124 airports, 11 of which are paved. It has 750,000 visitors a year, and the number is growing. Imports are growing, as are exports. So the country may have felt that to stay in front in Africa it needed a system that would provide some status.
One fact that I discovered struck me as a little odd: all the sailors, pilots and officers in Tanzania's forces are trained in China. The Chinese influence is growing. Was any consideration given to the possibility that if we did not provide the system, someone else would?
At the same time, there was an offer by the European Investment Bank to provide a modern civilian air traffic control system for all the east African countries, which would have helped tourism for all of them, at a massively lower price. An alternative was on offer.
We must then ask why the country did not take that alternative offer —[ Laughter. ] No, I am not going down that route.
Tanzania's growth rate is 5.6 per cent. The decision to grant the licence was made after much discussion. It was not the place of this Government to say what the Government of Tanzania should do. After this episode, our Government strengthened their procedures further, because they admit that they got it wrong. Although aid was withheld for a short period it was resumed, and progress by Tanzania confirms the wisdom of that decision.
We would all prefer that the money spent on the military were spent on improving the welfare of the people instead, but every country has the right to self-defence. I would not, in any circumstances, welcome or accept a licence for combat aircraft or tanks for a country in Tanzania's situation, but it had the right to decide that it needed a radar system—irrespective of the type of radar system. Let us divorce the need for the radar system from the type of radar system and concentrate on that point after the inquiry has taken place. When the inquiry has finished, we may have more evidence to discuss that point.
When my hon. Friend the Minister winds up, I hope that he can tell us about the progress that has been made on criterion 8 with our European partners, or on an international arms trade treaty. I hope that he can also tell us which countries will pose the greatest challenge in trying to agree and enshrine such a treaty.
I am pleased that the squalid British Aerospace sale of a military air traffic control system to Tanzania has reached the Floor of the House. All the parties involved in the deal should be deeply ashamed, but it is not an issue for party-political point scoring. It is good that the debate has not proceeded on that level.
The truth is that successive Governments of both parties go out of their way to promote British arms sales in a way that is unprincipled, is of no economic benefit to the UK, distorts our foreign policy and undermines our reputation. The case of the Tanzanian air traffic control system is a particularly sordid example of the UK's approach to arms sales. I am well aware—indeed, hopeful—that the investigation of the case by the Serious Fraud Office might result in criminal charges. That will be decided elsewhere. What is important here is for UK politicians to learn the lessons of the reality of UK arms sales policy and make real changes so that similar deals are not supported in future.
To that end, I want to put on the record what I know of British Aerospace's contract to provide an overpriced, outdated and unnecessarily military radar system to Tanzania, and of the powerful support given to the deal by the Secretaries of State for Defence and for Trade and Industry, and by the Foreign Secretary and the Prime Minister. Let us be clear: although the individuals holding those offices must take responsibility for the approach that they adopted, they were reflecting deeply held views and values in their respective Departments. The problem is systemic in nature, and that is what the House of Commons has to address.
When the project was being discussed in Whitehall, I argued that it was clear that the deal was so useless and hostile to Tanzania's interests that it must have been made corruptly. I had no evidence at that time, but evidence has since emerged that large payments were made to secure the deal. That is especially shameful when what was being sold—to one of the poorest countries in the world—was a useless piece of military technology priced far above its real value. We must therefore ask the following question: if British Aerospace and senior UK politicians were willing to go to the lengths that they did to secure the Tanzania deal, how much further would they go when promoting arms sales worth billions of pounds?
I became aware of the contract when the World Bank representative in east Africa objected to the proposed sale. Some officials who had served in the Department for International Development for many years were surprised that the project had come forward for a second time. I understand that there had been a proposal some years earlier for a military air traffic control system to cover the whole country, but it had been blocked because Tanzania simply could not afford it. Now it seemed that the same project was being split in two and put forward again as a two-stage project.
The World Bank representative in east Africa was very concerned about the contract, as Tanzania was being considered for enhanced debt relief under the heavily indebted poor countries initiative. As a condition of debt relief, HIPC rightly imposes controls on future borrowing that require that it must be confined to concessionary lending—that is, aid lending not at market rates from organisations such as the World Bank, the African Development Bank and so on. It also imposes a ceiling even on concessionary lending.
In this case, as has been noted, the loan was provided by Barclays bank which, as a commercial bank, was clearly incapable of providing a concessionary loan. Barclays colluded in this sordid project by inflating the size of the loan, it seems, and then pretending that it was concessionary in order to evade conditions set by the World Bank and the IMF. The smell given off by the project spread a long way, and Barclays has not been held to account, although Norman Lamb, as his party's spokesman on international development at the time, tried to do something in that respect.
As has been said, the World Bank representative in east Africa then decided to commission a report from the International Civil Aviation Organisation on the value of the deal to Tanzania. At the time it was argued by the DTI—and some people have repeated as much tonight—that Tanzania would earn money from the air traffic control fees and that the deal would therefore finance itself. As has been noted, the ICAO made it clear that the technology was old fashioned and expensive, that it would cover only half the country at best, and that it would not provide Tanzania with the air traffic control that it needed to develop its tourist industry. That development was very much in the country's economic interest.
By contrast, as I have said, the European Investment Bank was offering a loan at a fraction of the projected cost. From memory, I believe that it put the cost of providing air traffic control to three or four east African countries at about £12 million. The technology had progressed to the point that a much cheaper and more effective civil system was available, and an EIB loan to purchase it was on offer.
There is no doubt that Tanzania needed a new civilian air traffic control system to enhance its earnings from tourism. The British Aerospace system was an overpriced and old-fashioned military system that did not meet that need, as the ICAO made clear.
The right hon. Lady is making a powerful analysis of what happened. She said that the DTI had come up with the idea that the project might be commercially beneficial to Tanzania. Did it undertake an empirical exercise and provide relevant figures, or did it merely assume that it was possible that some benefit might arise, and offer no figures in support of that assumption?
I am trying to make it clear to the House that we need to address a deep culture in our Government system. The DTI sees it as its duty to push all arms sales deals and will always find arguments for them. That is how it is and any incoming Government will face the same culture. We need to change it.
When the events I was describing were taking place, the Department and I planned to offer Tanzania increased aid to help to fund a big new effort to provide free primary education for all children—it was great to hear the Secretary of State report an achievement figure of 96 per cent. It seemed wrong that our increased aid would finance that objectionable project. Hugh Bayley said that it would not. Of course it would. If we give money to a country that is buying a rotten project for which it has to pay in foreign currency, our increased aid is, in effect, funding the rotten project. We cannot turn away from that; we are implicated whatever we do.
I made the decision to cut back our promised aid by £10 million and went to see President Mkapa—a man I greatly respect and who did a good job by his country. He told me that the contract had been signed before he came to office, a deposit had been paid and there was a penalty clause if Tanzania did not go ahead. I concluded that the best way forward for all concerned was for the UK to refuse a licence under criterion 8. As has been said, Robin Cook had raised the threshold for deals made by all EU countries to include consideration of whether an arms sale would affect sustainable development—a provision that had never been made previously. There is no question but that the project affected Tanzania's development and that it should have been refused under criterion 8. If anyone argues that it should not have been refused under that criterion, we have to change the wording to tighten up the criterion so that we adhere to the standard.
Is the right hon. Lady saying that after the presidential election the Tanzanian Government were interested in finding a way out of the contract? If so, that differs from statements we have heard that a sovereign Government wanted to make the purchase.
The hon. Lady makes an important point. President Mkapa was a technocrat and a fine President, but he was not politically powerful and he inherited the contract. If the UK had done the right thing by refusing a licence under criterion 8, he would have been a very happy man, but there were penalty clauses for breach of contract and a payment of about £5 million had already been made.
The important point is that it was a UK decision. At that stage, I spoke personally to the Prime Minister, the Chancellor and the Foreign Secretary—then Robin Cook. The Chancellor and the Foreign Secretary agreed that we should stand firmly against the deal, but the Prime Minister just listened and gave no undertaking. The 2001 election then intervened and Robin Cook was replaced by a new Foreign Secretary who was strongly briefed by his Department and strongly supported the deal—the Foreign Office is at it, too; it absolutely believes that its duty to the UK is to promote arms sales.
The argument going on in Whitehall got into the public domain, and the Deputy Prime Minister convened an ad hoc Cabinet Committee to try to resolve the problem. The clear message from No. 10 was that the deal must go ahead, come what may, and all Secretaries of State were pressurised in that direction. We—that is I and officials at DFID, which is a great Department with lovely people—were still determined to fight, but only then did we discover that there was a secret pre-deal approval system. The Ministry of Defence had given approval for the project, which was already under construction in the Isle of Wight, on the basis that it would not be contested because it was uncontroversial. The thing was being built, people were working on it and by that stage, although we tried, no one could be persuaded not to issue a licence.
It is easy to say that we should cut off aid if there is corruption, but there are many poor and hungry people in Tanzania. The aid is for them. Someone else stole the money, but if we punish the poor for that we are punishing the wrong people. What should we do? That is the dilemma and that is why we need to tighten up our systems. President Mkapa and I reached the agreement that if he promised that there would be no second half to the project, we would go ahead with increasing our aid. I saw him after he had ceased to be President, and he told me that he had kept the promise, so although that makes the system even more useless—because it covers only part of the country—at least no more money was wasted.
My conclusion is that we need to ensure that such a project will never again be made. If we all agree that it is disgusting—and I think that it is great to see the Tory party engaging in this debate—we have a chance to try to clean up our system. Current UK policy is based on the assumption that all arms sales are good for the UK economy. Read Samuel Brittan repeatedly in the Financial Times and discover that that is not the case. No other sector is subsidised with so much political muscle pushing up the exports, come what may. If the sector cannot be profitable in its own right, the high-quality engineers who work in it should be redeployed in other sectors.
Secondly, there seems to be a belief that somehow we have to have an indigenous arms industry as though Napoleon might invade and we need to be able to make our own rifles. It is a completely time-lagged notion of the need to prop up and support arms exports. One of its effects is that our military gets lousy radios, lousy rifles and so forth that would have been better supplied if we purchased some of the equipment on the international markets.
I repeat how pleased I am that the Tory party has raised this issue, but let us go beyond the usual point scoring. We have really uncovered something dirty here. The sale should never have been approved. All those senior officers in our Government should not be promoting dirty arms deals like this. If criterion 8 allows it through, let us tighten it up. Let us agree it cross party. Let us clean ourselves up and look again at the way in which we organise arms sales for our country. We could improve our reputation enormously and improve our relationship with all sorts of countries, including some of the poorest countries in the world.
My right hon. Friend Mr. Lilley made a very good speech and I concur with his comments about Clare Short, who has acted very honourably throughout this entire process. I want to congratulate her—on the record—on that.
Roger Berry stated that this was the first time in his memory that the Conservatives had brought up such an issue in the House. That may be the case, and I am very pleased that the Conservative party is starting to bring up such issues. Many of my constituents feel very strongly and passionately about these types of issues. They feel strongly about how best to help African countries and how to develop our industrial relationship with them.
This is the first time that we have brought up such a debate because in the old days there would be far more Labour Members like the right hon. Member for Birmingham, Ladywood—principled members of a socialist Government who held true to their socialist beliefs and would refuse to allow a socialist Labour Government to behave in such a way. I cannot imagine the Government of Harold Wilson, James Callaghan or any of the other great Labour leaders getting involved in something as dirty as this.
Lynne Featherstone made a very good point when she mentioned the Attorney-General passing a coach and horses through the issue. After this House of Commons debate, the Attorney-General should look very carefully at some of the comments that have been made and should seriously consider further investigations.
I may have less knowledge than the hon. Gentleman about the House's proceedings, but I believe that the Attorney-General is the most senior legal expert in our country and that the buck rests with him, so he should call for an investigation—or at least look further into it. That is my response to the hon. Gentleman.
I find the hon. Gentleman's response to my hon. Friend Roger Berry rather intriguing. An investigation into the corruption side of the matter is already under way, so is the hon. Gentleman really suggesting that we need another investigation into the investigation or is he suggesting that the Attorney-General should somehow intervene in the ongoing investigation?
I have visited Tanzania on many occasions. My right hon. Friend the Member for Hitchin and Harpenden raised some of the emotional issues that are involved when we discuss a country such as Tanzania. It is regrettable that other Members have not focused on that point. Tanzania is an extremely poor country. When I toured a school near the Kenyan border and met pupils and teachers, I was astounded at the conditions there. I was then taken to the homes of the children and saw that there was no electricity or running water. Those people lived in absolutely dire conditions. They were extremely hospitable, as so many Africans always are. It was a poverty that is unimaginable in our country.
The GDP, as I mentioned in an intervention on the Secretary of State, is only $10 billion. It is difficult for us to contemplate such a small GDP. We have problems in our country with debts in our hospitals, and yet we are the fourth largest economy in the world. Just think for a moment of having a total budget of only $10 billion, with a population of 36 million. Basic mathematics enables us to calculate that the average Tanzanian has very little money to live on. Conditions are extremely poor.
I remember reading about the radar deal in the national newspapers in 2001. I was not a Member of Parliament at the time. I was baffled and angered by the Government's actions, especially as the Labour party had said that it would have an ethical foreign policy. I can honestly look the Secretary of State in the eye and say, "I do not believe that it is an ethical foreign policy to sell a radar installation that has military implications, and that costs so much, to Tanzania, when that country is so desperately poor." [ Interruption. ] The Secretary of State's Parliamentary Private Secretary, Tom Levitt, is shaking his head, but that is the truth.
I am sorry to intervene on the hon. Gentleman again, but he is not very clever with his facts. The fact of the matter is that the Government did not sell the system to Tanzania. BAE Systems sold the system to Tanzania. The Government granted it an export licence, which is different from being involved in the actual sale.
That is just semantics. The hon. Gentleman knows that the deal could not have gone through without the licence being approved by the Government. His point is immaterial. The deal could have been blocked if the Government and the Prime Minister had paid more attention to the right hon. Member for Birmingham, Ladywood and others who showed caution at the time.
I want to talk about the former Secretary of State for Trade and Industry, Ms Hewitt. She was instrumental in pushing the contract through. I concur with my right hon. Friend the Member for Hitchin and Harpenden, who said that the Secretary of State for International Development is here in the Chamber to defend the indefensible, when these things did not necessarily happen under his watch. They were happening under the watch of the right hon. Member for Leicester, West and I regret that, in our Chamber, we cannot call Ministers who were part of the original decision-making process to debates such as this. However, I have seen that happen in other Parliaments around the world—Ministers who made the decision at the time were forced to attend the Chamber. I regret that the right hon. Lady is not here today to listen to some of our concerns.
The system cost £28 million, which is an extraordinary amount. It amounts to one third of the entire education budget for Tanzania. Our aid to Tanzania in 2005-06 was not £121 million as the Secretary of State stated earlier; it was £113 million. We complain about corruption and waste, but we promoted this white elephant ourselves. The radar has a military capability that far outweighs the requirements of the country's 19 military aircraft. Several hon. Members have bandied around figures for the number of aircraft that Tanzania actually has. My hon. Friend Mr. Ellwood suggested that the figure was 12, whereas I understand that it is 19. No matter what the figure is, it is significantly smaller than the number that would justify such equipment. I cannot understand how the radar can be a priority for Tanzania, given that it has been blessed with stable relationships with its neighbouring countries. It has not been invaded and it has a democratic Government. When I think about the poverty experienced by the schoolchildren whom I visited in Lunga Lunga, the concept of spending such an amount on a military radar is quite shocking.
I appreciate the hon. Gentleman's concern, but surely he realises that if there had not been a military component to the export, the UK Government would have had no licensing power at all. Is he suggesting that the Government should have stopped such a non-military project?
We are dealing with this project, and as has already been stated, this deal stinks. I am trying to communicate to the hon. Gentleman, in a non-partisan way, that I genuinely believe, with my hand on my heart, that the deal was wrong for the people of Tanzania because of the extreme poverty that they face. He is a far more experienced parliamentarian than me, so he can try to tease things out of me. Luckily for me, I do not have responsibility for this matter—I am a Back Bencher. I am trying to talk passionately about how I feel about the Tanzanian people and to point out how violently opposed I am to our Government's actions.
Was not my hon. Friend's answer to Roger Berry absolutely right, and did not Clare Short give us the answer in her eloquent and accurate speech? There was an alternative—a far cheaper civil system. Such a system would have attracted tourists to Tanzania, especially American tourists, who will not go there because of the degree of radar cover. If that had been the proposition, we could all have supported something that would have been of genuine benefit to the Tanzanian economy.
I agree entirely with my hon. Friend.
The Secretary of State quickly glossed over allegations about the bribery of the middle man and the assertion that $12 million had been paid into a Swiss bank account. Will he tell us what the Government are doing to try to trace the money? Are we in discussions with the Swiss bank, or officials in Lichtenstein, to try to trace it, and have we asked for the account to be frozen?
We are a signatory to the EU code of conduct on arms exports, which obliges the Government to assess whether an export would undermine economic stability or hamper sustainable development in a recipient country. The Secretary of State said that Tanzania was doing awfully well, that it was now less dependent on foreign aid and that things had never been better. He put a very positive spin on the way in which Tanzania is moving. He has been to many African countries recently and he knows the huge financial constraints on those countries. I reiterate again that Tanzania is one of the poorest countries in the world. Having seen the way in which people live in north Tanzania, I agree with the right hon. Member for Birmingham, Ladywood that the EU code of conduct has been broken because the Tanzanian economy must have been affected by the sheer size of the contract.
I was concerned by the President of South Africa's comments to the international press, in which he implied that the United Kingdom was getting involved in all sorts of shady business deals. Our country is held in great esteem around the world, and historically we have had a tremendous reputation for being honourable.
My hon. Friend has moved on to the issue of morality and the ethical base for not blocking the decision to allow the sale. Does he share my alarm about the way in which the Government announced that they would have an ethical foreign policy, and then allowed the deal to go ahead?
Yes, and I referred to that earlier in my speech. I totally believe that the decision goes against the Government's ethical foreign policy.
I conclude with one last comment on a matter that was raised by Liberal Democrat Members—the involvement of Barclays bank, which financed the deal. We hear that we in Britain are constantly being overcharged by banks, and I believe that that is partly to do with the amount of foreign debt that banks write off. If Tanzania ever reneges on the £28 million loan, it will be interesting to see whether the British taxpayer ends up footing the Bill.
I am pleased that this debate is taking place. In the last Parliament, when the export licence was being granted, I spent a lot of time researching the deal, and a lot of time in correspondence with Clare Short. The Conservative spokesman, Mr. Mitchell, is absolutely right: the Prime Minister should be held to account for what happened in the case that we are discussing, particularly bearing in mind what the right hon. Lady has said. My great sadness is that the right time to hold the Government to account was the time when the export licence was being granted, and I believe that the House failed in that respect.
I reached the view that the deal was a scandal, and that the decision to grant an export licence was scandalous. At the time, I was sufficiently concerned about the matter to write to the police, urging them to instigate a criminal investigation, but they refused, so it was a surprise to be contacted by the Serious Fraud Office some three months ago, and to be told that it was investigating the deal, although I was pleased to hear that the investigation was taking place.
Let us consider the basic facts and remind ourselves why the deal was so scandalous. As we have heard, Tanzania is one of the poorest countries in the world. Back in 1997, when the Ministry of Defence was, unbeknown to DFID, giving the deal the preliminary green light under the F680 procedure, Tanzania's external debt was $7.6 billion and its per-capita gross national product was $220. Yet a British company sold a military air traffic control system to a country without an air force worthy of the name, at a staggering cost of $40 million. Recent allegations in The Guardian suggest that $12 million was paid to a middleman—that is 30 per cent. of the contract price. The International Civil Aviation Organisation, a UN body, stated that the equipment was
"not adequate and is too expensive".
The final report, to which the Secretary of State referred, has not been published, and it is up to the Tanzanian Government to decide whether it should be published.
I really do not think that that is right. The report was commissioned by the World Bank, so it must be the property of the World Bank. If the UK Government wished to press the World Bank to publish it, it probably could be published.
I am grateful to the right hon. Lady for that intervention, but at the time, I was told that the decision was the responsibility of the Tanzanian Government. In his winding-up speech, will the Minister give a commitment that he will do everything possible to publish that report, which was described to me by a World Bank official as a bombshell? It is overwhelmingly in the public interest for that report to be published.
May I concentrate on the Government's role in the affair? Why on earth did they sanction the sale, which is surely indefensible, inexcusable and wholly contrary to the criteria to which they committed themselves? The Secretary of State criticised the Conservatives for not having any criteria at all, and that was a fair and just criticism. However, is it any better to introduce criteria which the Government then ignored? If, as he suggested, criterion 8 is not sufficient to block such an export, it must be amended to ensure that in future such a deal cannot proceed.
On the financing of the deal, Tanzania could not simply borrow on a commercial basis. Because it was part of the HIPC initiative, it had to satisfy the International Monetary Fund that the Barclays loan was arranged at a concessional rate. The IMF confirmed that the financing package
"yielded a weighted average grant element"— it is interesting to hear of Barclays making a grant—
"of 35.9 per cent., which qualified the loan as concessional under IMF rules."
That was known to the Government when the export licence was granted.
Why was Barclays so generous? I challenged the bank on several occasions, but I did not receive any answers. The World Bank representative with whom I established contact confirmed that he had never encountered a commercial organisation that subsidised the purchase of military equipment by a very poor country. It does not make sense. Was it simply an act of generosity? Did it have anything to do with the fact that Barclays secured a banking licence in Tanzania in October 2000? Did the fact that Barclays held shares in BAE have anything to do with it? Barclays should be held to account for its role in the affair. I want banks to behave with a sense of corporate social responsibility, as that is the ultimate example of a business ignoring and evading that responsibility.
Did the then Secretary of State for Trade and Industry, Ms Hewitt, know of these bizarre financing arrangements when she granted the export licence in December 2002? I suspect from the speech of the right hon. Member for Birmingham, Ladywood that the right hon. Member for Leicester, West knew of those precise concerns when she decided to grant the licence, so she, too, should be held to account. Did she know of the allegations of impropriety—I suspect that the answer is yes—and was that taken into account? We need to know the answers.
In the aftermath of the totally unacceptable decision to halt the SFO inquiry into the al-Yamamah contract, it is imperative that that investigation and the offshoot investigations into BAE are brought to a proper conclusion without political interference. If we are to start to rebuild this country's reputation for adherence to the rule of law in these matters it is essential that those investigations are completed. The Government's utter hypocrisy in lecturing Africa about good governance while behaving in that way is quite stunning. Who on earth will listen to us lecturing about good governance if that is all that is left of our foreign policy with an ethical dimension?
May I conclude with an open letter to the British Government from the "Consortium of Concerned Tanzanians International", which calls on the British Government to intervene? It wants an independent inquiry in Tanzania—one should be held here, too—and it puts its case in graphic terms:
"How does a military radar that watches over one third of the nation help us defeat AIDS, improve our education system, and create more jobs for our young people?...The deal was not only wrong, it was unethical and indeed immoral."
That deal was conducted by a British company, and it was sanctioned by the British Government. We owe it to the Tanzanian people to establish the truth of this scandal.
The debate has been informed, detailed, intriguing and illuminating, shining a light into many dark recesses, particularly of Downing street. The debate was opened by my hon. Friend Mr. Mitchell, the shadow Secretary of State who in an intelligent speech gave a forensic analysis highlighting with skill the divisions, the frictions and the tensions at the heart of Government. He detailed a series of questions that remain unanswered, highlighting our concern about developmental progress in Tanzania, the significance of the UK contribution, and the importance of transparency between the UK and Tanzania and the other African countries with which the UK has a donor relationship.
That was followed by the Secretary of State who, in his usually measured and eloquent way, touched lightly on all the issues surrounding the debate. It was clearly a carefully constructed speech, but no assurance was given that the requisite reports would be published.
The Secretary of State's speech was not unusually carefully constructed, as the Minister says. The right hon. Gentleman gave no guarantee that pressure would be put on the World Bank to publish the report, although Clare Short said that that would, in her view, be possible.
However, the Secretary of State was right to identify three of the important issues, the first being the export licensing process and criterion 8. He stated that there had been one refusal from the DTI under criterion 8, but it was interesting to hear from Roger Berry that the France-UK score was 45:1. I hope the Minister for Science and Innovation will explain why the score is so out of kilter if we are all supposedly applying criterion 8 in exactly the same way across the European Union.
We accept that complex judgments are involved, but nothing that the Secretary of State said today justified the poor decision that was taken. He spoke about what is being done now, after the decision in 2001. In all his responses to interventions, it was clear that he was opposed to the deal, supporting his Secretary of State at the time and, I suspect, supporting the civil servants in the excellent Department for International Development.
Lynne Featherstone rightly emphasised the UK's excellent reputation in the world, the importance of maintaining that reputation, and the damage that can be done by transactions such as the one in question. She spoke about the universal recognition across the House of the importance of fighting corruption, and agreed that we must continue to do all we can. In his efforts to fight corruption in Africa and around the world, the Secretary of State will find that the Opposition strongly support that aim.
The hon. Lady stressed the necessity for the Minister to give the House an assurance from the Dispatch Box that the Serious Fraud Office will have the Government's full co-operation and the necessary resources to continue the investigation as thoroughly and expeditiously as possible.
The contribution from the hon. Member for Kingswood was extremely well informed and interesting. As a member of the Quadripartite Committee, he has inside information, much of which is confidential. That came across well in his knowledgeable contribution. He said that he was not convinced by the merits of the Government decision. That is a significant remark from a member of the Quadripartite Committee. If I understood correctly, he was not alone in reaching that conclusion. It was the unanimous decision of the Quadripartite Committee.
The hon. Gentleman pointed out the odd timing of the decision, a matter to which I shall return, and spoke in some detail about the systems that we should have in place for export licences. It is intriguing that the Foreign and Commonwealth Office took 18 months to reply to the Committee's letter and that when it came, the reply contained nothing more than members of the Committee already knew, which some would argue was an ideal parliamentary answer. The Committee has a reputation for the highest probity and discretion. The fact that the Government refused to provide the necessary information further fuels the suspicion surrounding the transaction.
We heard an excellent speech from my right hon. Friend Mr. Lilley, drawing on his experience during the time he spent in Tanzania. It was an articulate contribution made with great clarity and intellectual rigour. He asked what was known at the time that the decision was made. He made it clear that it was primarily a military system. No UK Minister has ever denied that, unless the Minister is about to rise to the Dispatch Box and claim for the first time that it was not. I hope that my right hon. Friend was wrong in one element of his conclusions, because what happened with this particular transaction must not set a precedent for the future. He summed up the debate very well when he said that the Secretary of State had been defending the indefensible.
We then heard a very powerful and passionate speech by the right hon. Member for Birmingham, Ladywood, who was Secretary of State at the time when the decision was made. Her views on this are well documented. She deserves enormous credit for her consistent and dedicated fight against corruption and for her consistent advocacy of people in the developing world. She has been a fervent champion for the cause of alleviating poverty. I hope that if she happens to leave this place she will continue her passion for helping people who are less fortunate than those of us in this House this evening.
The right hon. Lady rightly stressed the fact that many lessons must be learned from this episode. She pointed out the relationship between a HIPC procedure and a concessional loan, which brings in the question of Barclays bank, and noted the interesting fact about the European Investment Bank offering cheaper, more up-to-date technology—a significant factor in categorising this deal as dubious and squalid.
The right hon. Lady was right to correct Hugh Bayley to ensure that the House understood that increasing UK aid contributes to the cost of servicing the debt to purchase a system the export licence for which was approved by this Government despite significant controversy and disagreement within the Cabinet.
My hon. Friend Daniel Kawczynski, who also drew on his time in Tanzania, rightly referred to the significant levels of poverty that still exist there. He emphasised the role of Ms Hewitt, who was Secretary of State for Trade and Industry at the time, and expressed a desire to see her brought to this Chamber to explain and to answer questions on the decisions that she took, very controversially, some time ago.
My hon. Friend was also right to highlight his concern, which is shared by Members on both sides of the House, about the President of South Africa's comments on the United Kingdom's current position.
We then heard from Norman Lamb, who deserves to be congratulated on consistently pursuing this issue with vigour and not giving up. He provided a detailed analysis and synthesis of the issues surrounding the export licence. He rightly observed that Tanzania is one of the poorest countries in the world and that criterion 8 was ignored and overridden. He highlighted the Barclays transaction, which is highly suspicious, and the interrelationships that exist between Barclays bank and the British defence industry. He deserves credit for the consistent way in which he has pursued this controversial issue.
When the export licence was approved in 2001, life expectancy in Tanzania was just 45, 2 million people were infected with HIV, only 50 per cent. of the population had access to clean water and sanitation, and 51 per cent. of the population lived below the poverty line. It was in that context that the Prime Minister pushed the deal through the Cabinet, not only against the protestations of fellow Cabinet members but in the face of criticism from the World Bank and the United Nations, fierce opposition from British non-governmental organisations, and pleading from some in Tanzania itself. The International Civil Aviation Organisation described the system as
"not appropriate and too expensive" and the World Bank labelled it as the "wrong system".
Despite the Secretary of State's comments about Tanzania making progress since that time—we congratulate the people of Tanzania on that—he is wrong to say that further progress could not have been made if that country had had the ability to use the resources purely for alleviating poverty, and to use those from the donor community for the purposes for which they were originally intended rather than for funding debt to buy military and civil systems that the Tanzanian people did not need.
If the right hon. Gentleman had been in the Chamber for the whole debate rather than popping in after dinner, he would have heard that detail being discussed.
If what I have outlined was not bad enough, the amount of the commission should have set alarm bells ringing in Downing street. The Export Credits Guarantee Department is supposedly suspicious of any deal in which the commission is more than 5 or 10 per cent. In the case we are discussing, it was 29 per cent.—a $12 million commission, which could have been used in Tanzania to buy health care for 1 million people.
Conservative Members recognise that the deal—
The Serious Fraud Office and the Ministry of Defence are currently investigating the matter. They have confirmed that there may have been corruption and criminal activity. Will the Minister confirm that the Government will be fully co-operative and provide adequate resources?
All the senior figures in the affair are complicit. The Prime Minister and the former Foreign Secretary argued that Tanzanian sovereignty must be an overriding consideration in the deal. Is Zimbabwean, North Korean or Iranian sovereignty an overriding consideration for arms export licences from the United Kingdom? Of course not.
In 1997, the Chancellor of the Exchequer said that
"export credits for poor, highly indebted countries will only support productive expenditure."
In the context of the White Paper, such deals make the UK Government the target of criticism and allegations of hypocrisy, especially when we lecture others on the importance of good governance, accountability and transparency while appearing not only to be complicit but to facilitate a distinctly dubious arms transaction.
We are considering a sad episode for British governmental processes that has damaged our reputation for probity and propriety. It has exacerbated poverty when it need not have done so. It threatens to undermine the support for the international development agenda from British taxpayers and raises questions about the strength of the Department for International Development in relation to other Departments. The blame for that must lie with the Prime Minister.
The debate has been useful at times and interesting throughout. Mark Simmonds said that the contribution from his Front-Bench spokesman was intelligent. Obviously, the contribution from ours was very intelligent. Several hon. Members made interesting contributions, including my hon. Friend Roger Berry, Mr. Lilley, my hon. Friend Mr. Jenkins, Clare Short, and the hon. Members for Shrewsbury and Atcham (Daniel Kawczynski) and for North Norfolk (Norman Lamb). I shall not detail their contributions, but I hope to pick up many of the points that were made.
The subject of the debate was the Government's decision on the export of a radar system to Tanzania. I welcome the opportunity to close the debate for the Government by focusing on the decision, the context, subsequent developments and looking ahead.
The episode started in 1992, when our high commissioner in Tanzania alerted the then Government to the requirement for a new air traffic control system, and the Defence Export Services Organisation notified BAE Systems of the prospect. The Government's decision to issue export licences in December 2001 for an air traffic control system for Tanzania was taken after careful and lengthy consideration of the application—and clearly some controversy—against the Government's consolidated EU and national arms export licensing criteria. As my right hon. Friend the Secretary of State for International Development explained, the Government take their responsibility on arms export licensing, including in relation to sustainable development, most seriously. In assessing all applications, we draw on the expertise of several Departments to ensure stringent assessment against the licensing criteria. They ensure that the risks that concern us all, including internal repression, internal or regional conflict, the need to support sustainable development and the risk of diversion to undesirable end users, are rigorously assessed on every occasion.
The Government carried out just such an analysis when they considered the licences for the air traffic control system for Tanzania. We also discussed the issue thoroughly among Departments, and concluded that the licence should be approved. Although there were some concerns about the system and its suitability, ultimately they were matters for the Government of Tanzania to resolve. It was not our place to dictate to the Government of Tanzania which system they thought that they needed. Equally, if the export was not clearly in breach of any of the EU criteria, it would not have been right for us to withhold a licence with a view to blocking the proposed export.
One of the interesting features to come out of this debate is the balance that we need to strike between the criteria that should determine the Government's action and the independence of a sovereign nation. I should like to cite the remarks of Tanzania's Foreign Minister Kikwete—now its President—in 2002:
"We are not a department of the World Bank—we are a country and it's a bit insulting to suggest that we need to wait for the World Bank to prescribe what's best for us...The responsibility for Tanzania is in the hands of Tanzanians."
The Minister mentioned earlier the question of the suitability of the system. Reference has also been made to the final report of the International Civil Aviation Organisation, and I am sure that he is about to get to that subject. Will he, however, make a commitment in the public interest to ensure that that report is published?
I was about to get to it, actually. I thank the hon. Gentleman for helping me; he obviously understands my notes very well.
The issue of whether the Government of Tanzania needed a military air traffic control system—and whether it was, to coin a phrase, fit for purpose—has been a big feature of this debate. The criteria required us to assess whether the export was compatible with the technical and economic capacity of the recipient country. Beyond that, I repeat that it was for the Government of Tanzania to assess whether the system was appropriate for their needs, and whether to purchase it. The fact that the UK Government issued the licences did not oblige the Government of Tanzania to proceed with the purchase.
On the hon. Gentleman's question about the publication of the report, the two parties involved in this matter are the Government of Tanzania, whose sovereign status we should respect, and the World Bank. His question should be directed to them, not to the UK Government.
We have influence, and I hope that the hon. Gentleman will listen to it.
Why did we authorise this export to Tanzania, one of the world's poorest countries? Was the system too expensive? We have discussed these questions during the debate, and they were specifically considered in the assessment against the consolidated criteria, particularly criterion 8. In assessing the application, the Government were required to consider whether the export would
"seriously undermine the economy or seriously hamper the sustainable development of the recipient country".
Our judgment was that it would not, even in the worst case scenario. If we had assessed that the export was not consistent with any of the criteria, licences would not have been issued.
Will the Minister tell us whether any level of excess pricing for this deal would have led to its falling foul of criterion 8? Or could any multiple of the alternative available system have been proposed and, in the view of the British Government, still not have undermined the economy of Tanzania?
I do not think that it is a question of the price as such; that is a commercial judgment. It is a question whether the arrangement would seriously undermine. In that sense, of course, price is important, and there would be prices that seriously undermine.
In a moment. The hon. Gentleman has had a bit of a go today, but I might let him intervene in a moment.
I hope that colleagues will understand that it would not be right for me to comment on any ongoing Serious Fraud Office examination of this matter.
I want to ask the Minister a question, just before he leaves the subject of the consolidated criteria. If the criteria effectively allow the granting of an export licence in circumstances in which a deal is clearly shrouded in impropriety—or alleged impropriety—and in which the system involved is declared by the International Civil Aviation Organisation to be effectively not fit for purpose, does the Minister agree that the consolidated criteria must, therefore, be reformed?
I was coming to that point, but let me say, not least in answer to the question from my hon. Friend the Chairman of the Quadripartite Committee about methodology, that we have a clear methodology for applying criterion 8. It is EU-based and is summarised, I am advised, in the Export Control Organisation's 2005 annual report, commencing on page 83, and accessible via the DTI website. That is EU guidance based on UK guidance developed in the light of the Tanzanian case.
Obviously, there were some points arising from the Tanzanian case, which we have subsequently addressed. The need was highlighted for clearer procedures within Whitehall for assessing applications when criterion 8 came into play. We have therefore agreed guidance for officials when they consider the impact of a proposed arms export on the recipient country. That guidance has been incorporated into the EU criteria. Moreover, the principle that sustainable development must be taken into account in licensing decisions was enshrined in the Export Control Act 2002. DFID continues to play an active part in the licensing process, and in all discussions on the arms trade.
I want to remind Members that UK export controls are among the most robust in the world, and to underline the Government's record on transparency in export licensing. In 1997, we announced, for the first time, detailed criteria for assessing applications, which reflected our commitment to managing arms transfers responsibly, especially so as to avoid their use for internal repression and international aggression. Prior to that, there were no published criteria. Those criteria have been incorporated into the EU code of conduct, which now applies to all member states. Therefore, we have led on the issue.
At one stage, the right hon. Member for Birmingham, Ladywood said that the DTI always fights for arms deals, or words to that effect. If that is true, my Department is failing. In 2005, 129 licence applications were refused and many others were withdrawn when the stringency of the criteria were understood. I am advised that we actually have the highest refusal rate of any EU country. It is easy to throw around insults, but I am here to defend my Department's stewardship of this important policy.
We also publish comprehensive details of our policy and decision making in our quarterly and annual reports, and we are of course scrutinised carefully by the Quadripartite Committee. Not least because of the issues raised, we will initiate a review later this year of the controls introduced, in 2004, under the Export Control Act 2002. That is timed to commence three years after the new export control legislation was implemented, in accordance with Cabinet Office better regulation guidelines. There will be full public consultation, and the review is timely.
The Government also have a proud record on attacking corruption. We have ratified the UN convention against corruption, and put new legislation in place to allow us to do so. We have also established a new internal corruption group staffed by City of London and Metropolitan police officers. Our commitment to a new international arms trade treaty, as highlighted by my right hon. Friend the Secretary of State, is also relevant.
We will learn lessons from any situation of this kind, and the review will be the right time to consider those. We have had a lively debate, but I recognise that differences remain between the Government and the Opposition on this matter. The main differences are obvious. A Labour Government introduced a clear export control regime; the Conservative Government had no such clarity. A Labour Government have taken a series of decisive steps to combat corruption; the Conservatives let corruption fester during their Administration.
Question, That the Question be now put, put and agreed to.
Question accordingly negatived.
Question, That the proposed words be there added, put forthwith, pursuant to
Mr. Speaker forthwith declared the main Question, as amended, to be agreed to.
That this House notes that it would be inappropriate to comment on allegations of corruption in connection with the sale of a radar system to Tanzania in light of the current investigation by the Serious Fraud Office; notes the great progress made by Tanzania since 2002 in achieving debt relief, poverty reduction and public service reform; notes that the decision to grant an export licence for the air traffic control system was taken after due consideration of the Consolidated EU and National Arms Export Licensing Criteria; acknowledges that that decision took place after full discussion at Cabinet level; further notes that the UK subsequently established its own cross-Whitehall methodology for the assessment of applications against Criterion 8 of the consolidated criteria and was subsequently instrumental in establishing a shared methodology with its EU partners; and further notes the Government's efforts to promote an International Arms Trade Treaty.