Poverty and Governance

Part of the debate – in the House of Lords at 12:18 pm on 11 January 2007.

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Photo of Lord Garden Lord Garden Spokesperson in the Lords, Defence 12:18, 11 January 2007

My Lords, I, too, thank the noble Baroness, Lady Whitaker, for making this debate possible. Normally, I would want to do as the noble and learned Lord, Lord Archer of Sandwell, did and focus on Chapter 4, "Promoting peace and security". I have worked with DfID on Global Conflict Prevention Pool strategy in the past and pay tribute to the work that is done. The chapter is very good.

However, the debate has turned out to be perhaps more timely for considering Chapter 3, the chapter on corruption. I declare an interest as an adviser to Transparency International UK on prevention of corruption in the official arms trade. Chapter 3 of the report, "Supporting good governance internationally", makes superb reading, and I congratulate DfID on the very clear undertakings that the United Kingdom makes on those pages. In paragraph 3.3 we are going to,

"Encourage responsible behaviour by companies. Tackle corruption by closing ... loopholes that allow people to get away with illicit gains", and,

"Promote better governance by helping build accountability within states".

Paragraph 3.5 talks about the OECD's Guidelines for Multinational Enterprises and notes the difficulty that some countries, including the UK, have had responding to allegations of bad conduct. It declares that,

"we are committed to following up specific cases more effectively in the future."

Yet, as your Lordships will be aware, on the Thursday evening before the Recess, the noble and learned Lord the Attorney-General came to this House to announce the discontinuance of the investigation by the Serious Fraud Office into BAE Systems over payments relating to the Al Yamamah programme. The words that were used by the Attorney-General seemed to undermine the excellent anti-corruption proposals that are in this DfID report. He said that,

"it has been necessary to balance the need to maintain the rule of law against the wider public interest".—[Hansard, 14/12/06; col. 1715.]

That is the argument that will doubtless be welcomed by corrupt leaders around the world. In the light of this decision, it is difficult to read the declarations on page 39 of the report without a great degree of cynicism. I was particularly struck by the assertion that the UK will:

"Make UK business aware of the risks of bribery overseas".

The reports that appeared, predominantly in the Financial Times, about concerns in the City of London over the effects of the Attorney-General's statement seem to indicate that business is rather more aware of the risks than perhaps Her Majesty's Government are. The Financial Times of 23 December reported that the chief executive of Hermes, which manages the BT pension fund, had written to the Prime Minister warning that the decision threatened the UK's reputation as a leading financial centre. There were criticisms from other fund managers such as F&C Asset Management, and even from Morley Fund Management, which is actually a significant BAE Systems shareholder. It appears that business needs no warnings from the Government; the boot is on the other foot.

I ask the Minister to explain when she winds up the debate whether DfID now has a strategy to restore the credibility of the UK in this key area. The wrong message is already being taken up abroad. In Ghana, the Accra Mail of 18 December—in an article entitled "BAE Systems: Whose corruption?"—was quick to point out the double standards. The correspondent concluded by saying to Mr Blair:

"Thank you for showing us the way to good governance".

Yet this DfID report, as I said, is admirable. Corruption is insidious and undermines good governance, and can destabilise countries. It cannot be in our national interest, or that of any democracy, to rebalance the rule of law. It is not in the long-term commercial interest of the City or of the aerospace and defence industry. If allegations are made and not investigated, the reputation of any company, be it BAE Systems or other UK aerospace companies, is diminished. In a world that is moving towards higher standards, which is what we are after, business will not come to companies with tarnished reputations. I note that investment companies are now concerned about the ethical dimension of their portfolio and take note when they are investing of the reputation of companies in this respect.

In respect of our debate today, the real question is how we can take forward the report's very positive proposals in a world that will now be so much more sceptical about our good faith. The report says that the UK will set up a dedicated overseas corruption unit by the end of 2006, staffed by City of London and Metropolitan police with support from DfID and others, to investigate allegations of bribery and money laundering. This was first announced in the middle of last year, in June 2006. I hope the Minister can tell us how that is progressing. With such a unit, who will decide whether investigations should continue if someone else in government judges that the national interest is affected?

Another recommendation expresses an expectation that UK businesses will report attempted bribery overseas to UK embassies so that they can be investigated by partner governments. Does that include Saudi Arabia, or is it exempt? Is there a list of countries where such procedures do not apply? How many such reports have been made over the past five years? The report seeks to help others meet OECD bribery convention standards at a time when the UK itself is being questioned by the OECD. Paragraph 3.12 says that the UK is committed to tackling corruption, bribery and money laundering. That includes making sure that we rigorously enforce relevant UK laws so that people who pay bribes are prosecuted. I am afraid that the world will now find that difficult to believe. I hope that we will hear how this damage to our international reputation is to be repaired.