[Sir Nicholas Winterton in the Chair] — Arms Export Controls

– in Westminster Hall at 12:00 am on 26th March 2009.

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[Relevant documents: First Joint Report from the Committee on Arms Export Controls, Session 2007-08, HC 254, on Scrutiny of Arms Export Controls (2008): UK Strategic Export Controls Annual Report 2006, Quarterly Reports for 2007, Licensing Policy and Review of Export Control Legislation, and the Government's response, Cm 7485; and the Minutes of Evidence taken before the Business and Enterprise, Defence, Foreign Affairs and International Development Committees on 21 January 2009, HC 178-i, and 11 March 2009, HC 178-ii, on Strategic Export Controls.]

Motion made, and Question proposed, That the sitting be now adjourned.—(Helen Jones.)

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield 2:30 pm, 26th March 2009

I have pleasure in calling the Chairman of the important Committee on Arms Export Controls, Dr. Roger Berry.

Photo of Roger Berry Roger Berry Labour, Kingswood

It is a great pleasure to introduce this debate. Thank you, Sir Nicholas, for your very kind comments. It is a pleasure for all of us to participate with your good self in the Chair.

Considering the report on arms export controls and the Government's reply is an annual event. I should like to thank all my colleagues who serve on the departmental Select Committees for again producing a unanimous report. As I have said before, we are four Select Committees sitting simultaneously, and we are just about quorate most of the time. It is no mean achievement that we arrive at unanimous reports on a controversial set of issues, and that is a tribute to all who serve on the Committees.

I should also like to thank the staff of the four Select Committees, our Clerks and the officials of the Government Departments who have had the pleasure of responding to our questions. I thank all those who have given written evidence to the Committee and appeared before us as witnesses. The report of the inquiry that is before us today had the benefit of input from a number of witnesses. The former Secretary of State for Defence, my right hon. Friend the Member for Kilmarnock and—[Hon. Members: "Somewhere nearby."] I guessed that it might be somewhere nearby Kilmarnock, but I had forgotten precisely where—no offence to those who live near Kilmarnock.

Thanks go to my right hon. Friend Des Browne and the officials from the Ministry of Defence who came along with him. My right hon. Friend Malcolm Wicks, when he was Minister for Energy, also had responsibility for export controls, and I thank him and the officials of the Department for Business, Enterprise and Regulatory Reform for being witnesses.

I should also like to thank defence manufacturers, such as the Export Group for Aerospace and Defence, and the UK working group, which is the non-governmental organisation that represents Oxfam, Amnesty International and Saferworld. For this report, we heard oral evidence from representatives of Transparency International because we were considering issues of bribery and corruption. Moreover, I am pleased to record that my hon. Friend the Minister gave evidence to our Committee in January. Although we heard that evidence after the report had been published, it was important none the less. I am grateful for that and delighted that he is here to reply to the debate.

Although I am clearly partisan in a party political sense, I am not being partisan when I say, on behalf of the Committees, that we all recognise that the Government have made substantial progress in relation to arms export controls over the years. We greatly value the regular reports that we now receive, the greater transparency and accountability that they provide, and the Government's leadership on the whole process to secure an effective arms trade treaty and a convention on banning cluster munitions.

In the past, I have had one or two disagreements with Ministers on their reluctance to ban cluster munitions. I am delighted, however, by the recent decision to ban unilaterally the use of cluster munitions. Since that time, the UK has played a leading role in securing an effective convention, which we hope will be properly implemented. Therefore, there is a whole range of issues on which the Committees would wish to congratulate the Government.

However, the benefit of these debates is not derived from people such as me singing the Government's praises. I have spent five minutes doing that, so I would like to spend the rest of the two hours and 55 minutes of debate identifying issues on which further progress can be made. I hasten to say, Sir Nicholas, that I will not personally take up all the remaining time. We have a fair bit of time to allow all hon. Members to contribute, as I hope that they will.

There are a number of ongoing areas on which the Committees' view is different from the Government's.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

Does not the hon. Gentleman think that it is unsatisfactory that the Government response to the previous 2007 report was not received in time to be included in the response in 2008? He has just referred to the Minister's important evidence to the Committee in January 2009, which dealt with Gaza and other such matters, but that could not possibly have been included in the report. Does he not feel that this highly important debate is far too historical, and does he not think that there should be a mechanism to bring the whole process much more up to date?

Photo of Roger Berry Roger Berry Labour, Kingswood

The hon. Gentleman raises an important point, but it is not the fault of the Government. We have this debate annually. We tend to publish our report in July and the Government respond. Usually, at the end of March—it was 27 March last year—we have a debate in this place. Unfortunately, it is inevitable that the debate takes place some time after the publication of both the Committee's report and the Government's response. Unless we have more debates on arms export controls in the House—I think that we should—it will be difficult to determine a way of overcoming that problem. Perhaps I can offer the hon. Gentleman some encouragement. I intend to refer to several issues that cropped up during the recent evidence session with the Minister, which I am sure will be entirely in order because they relate to arms export controls. I do not think that any of us are precluded from raising more recent events in the debate.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Order. I assume that the Chairman of the Committee will use his discretion when referring to matters that are not contained in the reports under debate. However, I am disposed to use my discretion this afternoon.

Photo of Roger Berry Roger Berry Labour, Kingswood

As always, I am extremely grateful to you, Sir Nicholas.

Let me start with a few comments about the perennial issues of brokering, trafficking and extraterritoriality. Over the years, the Government have introduced extraterritorial controls in relation to brokering and trafficking. The Government say that the purpose of that is

"to ensure that unscrupulous traders cannot pursue deals that concern the UK simply by carrying out the business from another country."

That is an excellent summary of why it is necessary to have extraterritorial controls over arms dealings by UK persons abroad. The Export Control Act 2002, which came into operation in 2004, regulates, for the first time, UK persons abroad when they trade in missiles with a range of more than 300 km—they are usually referred to as long-range missiles—and torture equipment, or when they trade to an embargoed destination.

Following the recent review of the arms export control regime, the structure for regulating brokering has extended extraterritorial controls to small arms, cluster munitions and man-portable air defence systems, or MANPADS. The Committees warmly welcome that decision. I, like others, have said on many occasions that the omission of small arms from the 2002 legislation was unfortunate, to put it mildly. It bears repeating that small arms are the current weapons of mass destruction. They kill a man, woman or child every minute—half a million people on this planet every year. The Committees and I welcome the fact that the Government have finally accepted our recommendation and that small arms, cluster munitions and MANPADS are now covered by extraterritorial controls. The Government deserve congratulations on that.

Photo of David Drew David Drew Labour, Stroud

I apologise for missing the first few minutes of my hon. Friend's remarks. Has the Committee looked into what advice is given to high commissions and embassies on being proactive so that if anyone is dealing extraterritorially, they can find out about it through due investigation and have the means to take actions?

Photo of Roger Berry Roger Berry Labour, Kingswood

The Committees have repeatedly expressed concern about end-use controls, about which I shall say more in a moment. It is essential that our missions overseas monitor what is going on in the arms trade, and specifically what is going on with British arms exports. Obviously, the Minister can speak about this himself. There is no question but that the Government do some of that, but there is an issue about whether the monitoring is sufficient.

Photo of John Bercow John Bercow Conservative, Buckingham

The hon. Gentleman will recall that when giving evidence, the Minister referred us to ongoing discussions between non-governmental organisations and defence manufacturers about category B issues. On the subject of the possibility of a register of brokers, does the hon. Gentleman recall that we pressed Ministers for a conclusion to the work undertaken since 2007? I suggested that it was being farmed out into the long grass, and the Minister said that it was important not to make a hasty decision, of which I assured him he was in no danger.

Photo of Roger Berry Roger Berry Labour, Kingswood

I recall that conversation. The Committees have again recommended that there should be a register. I, too, look forward to the Minister's response on that issue later in the debate, as it is important.

Given that the Government have progressively extended extraterritorial controls, the obvious question is why they do not extend such controls to cover trade in all items on the military list. For a long time—I cannot remember how many years—the Committees have argued that the logical solution to the Government's recognition that there is a problem is to have full extraterritorial controls over all items on the military list. Those of us who can recall the Labour party's 2001 manifesto read it to mean that—sort of. However, I have quoted that in previous years, so I will not do so again today. I merely note that if there is a problem with people avoiding UK domestic legislation by simply popping overseas, or doing deals overseas indirectly through brokering and trafficking arrangements, that loophole needs to be closed.

We have recommended that all military items should be covered. As John Bercow rightly said, the Government have responded by saying that discussions are ongoing between NGOs and defence manufacturers. I echo his comments: when do the Government expect to hear the outcome of those discussions? Are they planning for the extraterritorial controls at least to include anti-vehicle land mines, and if not, why not? Finally, to summarise the point, having been persuaded to move so far, why on earth do the Government not simply legislate for full extraterritorial controls over goods on the military list? Can the Minister advise us on any progress made to analyse the merits of a register of brokers, which the Government seem to have recognised in numerous comments?

On end-use monitoring, I always remind myself that the only thing that really matters in the arms trade is the end use. It is simply about ensuring that whoever ends up with UK arms exports does not use them to abuse human rights through external aggression or internal repression. It is the ultimate end use that matters. How the arms get there, and through which countries they might be transhipped, are issues that help us understand how the end user gets them, but the bottom line is that when answering the question of whether an export licence should be granted for a particular set of equipment, the answer depends on knowing the end use. Enforcing policy on the arms trade must be all about ensuring that what we are told about the end use is correct and, if not, making sure that sanctions can be applied to put it right or to ensure that we are not deceived again.

End use is what it is all about, which is why the Committees have argued for many years that end-use monitoring is necessary. We welcome the Government's intention to introduce some end-use controls through the European Union. In their response to our report, the Government promised an update on EU action on the issue by the end of 2009. They also promised to seek unilateral action if the EU route proved unpromising. In January, we were advised that there was some movement, but that it was slow. What progress has been made in discussions on end-use controls within the European Union, and how long will the Government wait before beginning unilateral action?

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

The hon. Gentleman is being generous with his time and is giving a clear and erudite account of his report. Does he agree that monitoring is best done by those with specialist knowledge, and that it is therefore regrettable that cuts in the number of military attachés are taking place around the world? Does he not also think that military attachés ought to have a more formal role not only in monitoring but in commenting on whether an arms licence should be given for a particular piece of equipment?

Photo of Roger Berry Roger Berry Labour, Kingswood

Unlike the hon. Gentleman, I can argue in support of more public spending, because I believe in a fiscal boost. He has a slight problem in arguing for reductions in spending. However, leaving the macro-economics aside, it is obviously necessary, if we are to have proper end-use monitoring, to have the proper resources. There are circumstances in which a more careful examination of end use is necessary. In a moment, I shall say a few words about arms exports to Israel, which spring to mind as an area where the end use of certain exports is sometimes not entirely clear. The resources must be there; it is an important point.

One particular end use issue is re-export—for instance, where a licence is granted for the export of UK arms to country A, and country A re-exports to country B without telling us. The end-use certificate says that the arms are going to country A; everyone says that they are going to country A, but nobody tells us that they might be re-exported. We do all the checks and, in good faith, the arms go to country A.

What happens if country A exports the arms to country B? What happens if country B is subject to a UN or EU arms embargo? We discussed a case last year, which is referred to in the previous report. The issue is the same. Maritime patrol aircraft were exported to India and the press started running stories that India was going to export them to Burma. One of our witnesses was the then Foreign Secretary, my right hon. Friend Margaret Beckett. We asked her whether the export licence should have included a clause saying that arms could not be re-exported to a country subject to an EU or UN arms embargo. She responded:

"With the benefit of hindsight, I suppose one could say it might have been desirable."

I agree with that, and the Committees believe that it would be desirable for the re-exporting issue to be taken extremely seriously.

I repeat that I acknowledge that at the licensing stage, officials are scrupulous in trying to ensure that the information is accurate. If an export licence is granted for country A, they make sure that the arms go to country A. However, one would need foresight beyond our capabilities to say, "I know that there is absolutely no risk of re-export". When aircraft were exported to India, I do not believe that we knew that there were people contemplating re-exporting them to the Government of Burma. That could not have been known, and I suspect that if it had been, we would not have granted the licence.

Photo of Roger Berry Roger Berry Labour, Kingswood

Of course. I thought that the issue of Burma might encourage the hon. Gentleman.

Photo of John Bercow John Bercow Conservative, Buckingham

It has done. I rarely disagree with the hon. Gentleman on these matters, but I think that he errs on the side of generosity towards the powers that be, and I caution him against the development of such a tendency. Off the top of my head, I suggest that one would have good grounds for suspicion in relation to India. India has a long, undistinguished and ignoble track record of heavy arms sales to Burma, and it seems keen not to be outdone on the commercial front by China. We must be very careful.

Photo of Roger Berry Roger Berry Labour, Kingswood

I am extremely grateful for that intervention. I withdraw my comment without reservation. The hon. Gentleman is right. India does have form in relation to Burma, and I have been far too kind to the Government. I hope that the record will be corrected by my comments.

When we have raised the issue of re-exports in the past, the obvious retort is, "What would this measure actually do?" At the least, it would send a signal that we do not want British arms to be re-exported to countries that are subject to an arms embargo. Furthermore, future export licence applications from country A would be in jeopardy if they went against our contractual wishes on re-exporting. Other countries add re-export clauses to their export licences, and there is a clear moral argument for doing so. Given all the challenges facing arms export control, sticking in a re-export clause cannot be the most difficult. Will the Government consider the proposal again, and not dismiss it as they have done in the past?

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire

I agree with the hon. Gentleman's request for the inclusion of re-export clauses. It is beyond me why the Government will not simply accept that as a matter of course. Perhaps the more fundamental issue is enforcement. One can easily see if an aircraft has been moved, but with smaller arms and military hardware and software of a less observable nature, it is probable that unscrupulous states will make promises and completely ignore them. Unless we have an enormous infrastructure, we will not be able to track those with nefarious intentions.

Photo of Roger Berry Roger Berry Labour, Kingswood

There are laws, both domestic laws and laws with extraterritorial implications—on sex trafficking for example—that we know are difficult to enforce. We legislate because we believe that we have a responsibility to say, "This should not be done, we do not approve. It will be a criminal offence if we catch you doing it."

Suppose we grant a major export licence to India, for example—I am sorry, I do not want to pick on India—which involves aeroplanes going to a particular country. There could be a clause stating that those aeroplanes, or other military equipment, cannot be re-exported to an embargo destination. If that country re-exports, we can say, "We don't trust you. In future, we will grant no more licences." Sanctions can be applied. In such cases, it will be clear what is going on, although in other cases it might be more difficult.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire

I do not want to detain the hon. Gentleman long—I agree with him. My issue is really for the Minister. It seems self-evident that we should make the changes that have been suggested, but the challenge for the Government will still be one of enforcement. That will be straightforward with large, heavyweight hardware. In his summation, I would be interested to hear the Minister's comments on the hon. Gentleman's proposal, and on whether the Government have thought about enforcement and how we can ensure that subterfuge and illicit trading are prevented.

Photo of Roger Berry Roger Berry Labour, Kingswood

We all want to hear the Minister, and there will be plenty of time for interventions. There are other hon. Members and right hon. Members who wish to speak, so I will move on to one or two final topics before I sit down.

For many years, the Committees have expressed concern about the export of arms to Israel that might be used in the occupied Palestinian territories. That subject took up a large part of the evidence-taking session that we had in January with the Minister, and a more recent evidence-taking session with a number of NGOs and defence manufacturers. Given recent events in Gaza, it is hardly surprising that a number of hon. Members might wish to raise that matter this afternoon.

For some time, Government policy has been that export licences for arms exports to Israel should be refused if there is a risk of the items being deployed aggressively in the occupied territories. Such licences are judged on a case-by-case basis, but the Government have made it clear that arms export licences will be granted to Israel only if there is no significant risk of their being used aggressively in the occupied territories.

In 2002, the Government announced their policy on incorporation, which the Committees felt was a breach of that principled policy. Specifically, it allowed the export of head-up display units manufactured in the UK to the US for incorporation in F-16 fighter jets, which are known to be exported to Israel. In 2006, the British Embassy in Tel Aviv confirmed that F-16s had been used offensively in Lebanon and Gaza. More recently, there have been extensive reports that F-16s were used in the recent offensive against Gaza. F-16s are particularly good at precise targeting because of the quality of their head-up display units.

We criticised the announcement made by the Foreign Secretary in 2002 that head-up display units and similar incorporated items could be exported to the US without serious questions being asked about the ultimate end use. When we made that criticism, we were told that the importance of the UK's trade relationship with the United States outweighed the consolidated arms export criteria on human rights and regional stability—so we had to overlook it because of our special relationship with the United States.

When the Minister was questioned on 21 January, he told the Committees that it was not yet known whether F-16s taking part in the most recent assault on Gaza had UK head-up display components. I think that the Foreign Affairs Committee was told, on 4 March, that an assessment of that was under way. Will the Minister tell us when the assessment is expected to be finalised and laid before Parliament? When will we know whether the F-16s that took part in the most recent assault in Gaza had UK-manufactured head-up display units incorporated in them?

In his letter of 19 February to our Committees, the Minister said that, at that evidence session,

"I stated, on the basis of the advice that I had received, that no export licences for F-16 Head-Up Display (HUD) equipment to Israel had been granted since 2002...While this is correct, I would like to clarify that this refers to licences for the export of F-16 HUD components direct...to Israel, for use in Israel. Since that date there have been a small number of licences granted for these goods where although not going direct to Israel, we were aware that Israel was the ultimate end-user".

Will the Minister confirm that, following the policy change in 2002, the Government have no means of preventing Israel from using F-16s incorporated with UK-manufactured head-up display units aggressively in the occupied territories? Will he confirm, so that it is absolutely clear, that licences for the export of head-up display units have been granted in the full knowledge that Israel would be the ultimate end user?

Photo of Gordon Prentice Gordon Prentice Labour, Pendle

I have a briefing from Campaign Against Arms Trade that touches on the point that my Friend just made about the F-16 fighter aircraft, but it also mentions the Apache helicopter. It asserts that those helicopters

"have contained UK manufactured components including missile triggering systems".

Does he know whether Apache helicopters were used in the Israeli assault on Gaza in December?

Photo of Roger Berry Roger Berry Labour, Kingswood

I can confirm only that I have read that in press reports, so the Minister might be the best person to answer the factual question. I picked F-16s because of their unique role in conflict in the middle east, but I could equally have selected Apaches. I have read in the press that Apaches were used—no doubt the Minister will respond to that point.

On direct exports to Israel, the Minister said, in the 21 January evidence session, that the Government would not issue a licence where they had human rights or other concerns under the consolidated criteria. He also said that it was not clear which equipment had been used in the recent conflict, and that that was being investigated. Will the Minister advise the House as to the outcome of that investigation?

Let me speak personally on this issue. I have heard similar sentiments to mine expressed by other members of the Committee, but this is not the Committee's policy. I have always had some difficulty in understanding the practice of UK policy on this issue. Leaving the incorporation issue aside, the policy has been that licences would not be granted for arms export sales to Israel if there was a risk that they would be used in the occupied territories. We all know the UK Government's position on the legal status in the middle east, so it is hardly surprising that that would be a desirable thing to do, but I have never understood how that policy works in practice. Do the Israel defence forces have one stash of weapons with a Union Jack on it, which it they have been told they cannot use in the occupied territories, and another stash that they can use in Gaza, the west bank and east Jerusalem? I genuinely do not understand how that works.

There is another issue that I do not understand. Like everyone else in the Chamber, I am sure, I condemn violence unequivocally. One reason why I wanted to be a member of the Committee when it was set up is that I believe that conflict represents the failure of diplomacy, as the cliché goes. I think that we should try to resolve conflicts without violence wherever humanly possible, and that we should certainly try to control the arms trade to ensure that arms do not get into the wrong hands. I passionately believe that it is deplorable that Hamas sends rockets into Israel, and I believe that Israel's armed intervention in the occupied territories, some of which I have seen, is equally deplorable. I am even-handed on this issue, but our policy on arms exports and embargoes is not even-handed. On one hand, we have Israel, the most powerful military state in the middle east, being in breach of countless United Nations resolutions and in illegal occupation of much of the middle east, but there is no arms embargo on it. On the other hand, there is an arms embargo on Hamas. I am not a defender of either side; I simply make the observation that it is extraordinary that there is no such arms embargo, given the conflict over the years and certainly the recent conflict in Gaza. Why is that?

There was an announcement that the UK Government would do all that they could to prevent arms from getting into Gaza. That is fine, but there was no announcement at the same time that there would be an embargo on arms sales to Israel. I find that double standard difficult to comprehend, and it prompts me to ask what Israel would have to do in the middle east to qualify for an arms embargo. I do not raise this issue flippantly, and I do not believe that my view will command universal support. Indeed, I have been verbally abused by otherwise reasonable people for expressing such views. I am simply asking why there is that double standard in arms export control policy in the middle east. That question deserves an answer.

Finally, let me address the happier topic of the international arms trade treaty. Our report concluded that the Government were to be commended for and supported in their efforts to achieve a comprehensive and effective international arms trade treaty. In December, a large majority of Governments voted in favour of a UN General Assembly resolution to establish an open-ended working group on such a treaty. The only state to vote against the resolution was the United States, but perhaps it will change its view in a few months. I hope that it does. Of course, there were also a number of abstentions. Non-governmental organisations were adamant, in their evidence to the Committees, that if the scope of the treaty was not wide enough, the UK should not be a signatory to it. I have two questions for the Minister on that. First, what took place at the first open-ended working group on the treaty? Secondly, does he share the NGOs' concerns about its scope?

There are many other topics that I could discuss, such as bribery and corruption, but in fairness to colleagues who wish to speak, and to give the Minister plenty of time to respond to the long list of questions that is building up, I shall conclude. I reiterate that the Committees believe that the Government have made substantial progress in recent years on controlling UK arms exports, and that we are pleased that they have accepted a number of our recommendations. We recognise that they have also disagreed with a number of recommendations, but honest people may have different views.

However, we have real concerns about the issues that I have raised in the past half an hour and the issues that colleagues will raise. We want further progress to be made on extraterritorial controls, which should be a simple matter. We also want the Government to do their level best to ensure that the re-exporting of UK arms does not continue to be a problem. All of us, whatever our views on arms sales to Israel, would also desperately like to know what the Government's policy on the issue is. There are therefore big issues to consider further, and I am grateful that the Minister is here to respond to all our questions.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling 3:10 pm, 26th March 2009

I am pleased to follow Roger Berry, who chaired the four Committees with great diligence and effectiveness during their consideration of the reports.

At the Committees' evidence session on 11 March, we took evidence from non-governmental organisations such as Amnesty International, Oxfam and Saferworld. I asked whether they could cite specific examples of UK arms exports that had breached the EU consolidated criteria, and I was supported in that by my hon. Friend John Bercow. At the time, the NGOs were unable to come up with specific examples, with the exception of Israel, to which I shall come. They said that they would like to go away and reflect further, and as of today's debate, we have not heard further from them. I would therefore conclude that, in broad terms, and with some exceptions to which I shall come, the British Government are in pretty full compliance with the terms of the EU consolidated criteria. However, there are three areas of policy that need further careful consideration by the Government. One is components, and the remaining two relate to two particular countries, to which I shall come.

On components, the Government need to carry out a serious review of their present policy and particularly of whether it complies with the EU consolidated criteria. In the Committees' evidence session with the Minister, I specifically raised with him the issue of the head-up displays and the F-16s and I asked whether there was any evidence that they had been used in the recent operations in Gaza. There is also the issue of Apache helicopters, which Mr. Prentice raised in an intervention. Equally, there is the issue of whether British components have been incorporated in unmanned airborne vehicles—UAVs. There are a number of other examples of British components ending up in other countries' complete weapons systems, and of those systems in turn ending up in undesirable hands.

I certainly recognise that this is a significant and difficult policy issue for the Government. Many British companies that employ considerable numbers of people and transact high-value business manufacture components for weapons systems. At the same time, however, it can make no sense and is, indeed, of dubious ethics to have an arms export policy that prohibits a complete weapons system from going to a particular destination, but which is so leaky that components for that same weapons system can go into similar or identical weapons systems in another country and then end up in a destination prohibited by the Government. I hope that the Minister will agree that that is an unacceptable position to get into, although it is precisely the position that the Government are now in in some areas. In his reply to the debate, will the Minister therefore give us an undertaking that the Government will carry out a full review of their arms export policy in relation to components for weapons systems on the military list of the EU consolidated criteria?

I hope that the Minister will be able, in due course, to reply fully and frankly in an entirely open policy statement. I use the phrase "entirely open" deliberately. Following the Minister's evidence session in front of the four Committees, he wrote the letter of 19 February 2009, to which the Chairman of the Committees referred. Although our Chairman quoted from that letter, the Minister and his Department had classified it as restricted. Having read the letter in full, however, I consider that classification wholly unnecessary, because there is nothing whatever in it that could not perfectly well be put in the public domain, although the terms of the letter might cause the Government limited embarrassment. I consider that the word "restricted" was put on the letter solely to gag the members of the Committee and to prevent them from making it public. I hope that the Minister will reflect on that. When he returns to the issue of components, therefore, I hope that he will address it in full and detailed terms and in a fully public way.

Photo of Roger Berry Roger Berry Labour, Kingswood

I agree with the right hon. Gentleman. I gave that quote knowing that it had subsequently been derestricted, and I make that clear so that no one thinks that I actually read from a restricted document. However, he makes a good point when he asks why the document was restricted in the first place.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

I am grateful to the hon. Gentleman. His intervention is entirely correct. I have discussed the issue with the Clerk of the Committees, and the current position is very unsatisfactory. We are having this debate while discussions are taking place between the Clerk of the Committees and the Minister's officials as to which bits of the letter are declassified and which are not. That is a profoundly unsatisfactory position to be in.

Photo of John Bercow John Bercow Conservative, Buckingham

Obviously, the Secretary of State in any Department is ultimately responsible for all that happens or fails to happen in it. It would be a matter of some interest to establish when the decision on the restricted status was made and by whom. Did the Minister make it or was he acting under orders? We really need to be told.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

I am sure that the Minister who is replying to the debate has heard what my hon. Friend said.

I turn now to the two countries to which I want to refer. The first is China. I have been going through with considerable interest a very useful report entitled "Good Conduct? Ten years of the EU Code of Conduct on Arms Exports", which was produced by a variety of EU NGOs in June 2008. The report states that in the five-year period 2002 to 2006, the UK received approval for licences to export military equipment to China valued at just over €450 million. That represents a substantial element of arms export business. That value of that business must, I believe, be set alongside China's performance on human rights. I shall not go into that in detail, because all hon. Members present will be familiar with China's human rights record, but I shall clarify one area: the Chinese record on capital punishment.

As hon. Members may have seen, Amnesty International has recently produced a further, updated report on the matter, and it was covered in detail in The Independent on 24 March. The newspaper report stated:

"Death sentences handed down by China for crimes including tax evasion and bag-snatching represented three-quarters of the 2,390 executions carried out around the world, up from 1,252 in 2007."

Elsewhere in the two-page spread is a picture of a rather attractive tourist-type posh bus. When one looks at it more closely, the bus is distinctly more sinister. The report about the bus states:

"China is innovating in the market of death with a fleet of execution buses in which convicts are efficiently and cleanly put to death by lethal injection.

The mobile death chamber means executions can be ordered and carried out by courts in towns and villages around a particular province, with executioners and medical staff shuttling between different jurisdictions. Authorities say the initiative is a deterrent against crime."

The report continues with a quotation:

"'First we established there was a demand for execution vehicles. Then we designed the vehicles and applied to the government for certification. This procedure is a must,' said Mr Zhang, from the marketing department of Jinguan Auto".

It concludes:

"The makers of the van say sales are steady, and urge any foreign governments interested to get in touch."

I fear that around the world there will be Governments who think that a death bus is an important item of public expenditure for their regime, and that they will make purchases.

If the record of China on human rights internally is put alongside its systematic, ruthless and continuing denial of human rights in Tibet, its continuing threatening posture towards Taiwan and the close interest that it now takes in its near neighbour Nepal, which itself has a Maoist-led coalition, the British Government need to look closely at the question whether we should be doing hundreds of millions of euros of arms-export business with China. I urge the Minister to review policy in that area.

Last week I went with members of the Select Committee on Foreign Affairs to Israel and the occupied territories and Gaza. I want to tell the House what I saw with my own eyes in Gaza. I want to make it clear at the outset, as I have done every time I have spoken on this subject, that I condemn absolutely and unreservedly the sending of rockets by Hamas into Israel. We started at a hospital in the centre of Gaza City. It was burnt out, through the use of phosphorous munitions. It was not possible to tell whether, or to find anyone who would say whether, there were any Hamas fighters in the hospital. I have no grounds for believing that there were any, but equally I cannot say absolutely that there were not. However, there could not be any conceivable justification for burning out an entire hospital on the ground that one or two Hamas fighters, or a small group of them, were in the vicinity, or possibly on the roof of the hospital.

We then went to one of the two very large Commonwealth war grave cemeteries in Gaza. In the cemetery, which has 4,000 headstones, we met the splendid Palestinian gentleman who is in charge of it and keeps it immaculately. He came to meet us in his suit and tie, wearing his decoration, an honorary MBE. He showed us the 300 headstones that had been destroyed or seriously scarred, which will all now have to be replaced. He also showed us, a considerable distance away, the Israeli tank firing-points from which shells had come into the cemetery. I asked him whether any Hamas fighters had been in the cemetery at any point, to which he replied, "Absolutely not."

We went to a relief distribution centre, run by Islamic Relief—a very good charity among the Islamic countries—and funded by the Department for International Development. It distributed food, tents, kitchen equipment, sanitary items and so on. I had heard and read about—and hon. Members will have seen in the press—the extent to which the Israelis targeted food production and Palestinian farms during the recent offensive. I met a Palestinian farmer who told me his farm had been destroyed; his orange trees had been smashed. He told me it would take at least 10 years to replant those orange trees and bring them to maturity for fruit. I asked him, "Were there any Hamas fighters in your farm?" He said, "Absolutely not."

Then, perhaps most disturbingly of all, we went to one of the largest industrial estates in Gaza. If there had been Hamas fighters there one might, yes, have expected one or two of the factories and warehouses to be destroyed, and a few others to be damaged. It was a huge estate, providing employment opportunities and income to what must have been many thousands of people. It had been flattened. Not a single building was standing. It had been destroyed, brought down to the ground, for as far as one could see. It was a horrendous sight. I came away with only one conclusion. The engagement was not military to military, with armed people on either side engaging each other. It was an engagement about collective punishment, and that is what has been inflicted on Gaza.

That brings me to my next point, about an interesting and important piece of information given to me about the rules of engagement under which the Israelis operated during the recent Gaza conflict. I was told on very high authority, completely independently and not by Palestinian or Israeli sources, that in the rules of engagement—I have not had sight of them, which is not surprising, as they are highly classified—the members of the Israeli defence forces were told that above all else they must avoid being captured.

Hon. Members will know the extent to which Israel is transfixed by the Corporal Shalit case. Corporal Shalit was kidnapped and is still a hostage. He has been a hostage for three years. Indeed, outside the Prime Minister's house in Jerusalem we saw the demonstrations and the tents of the people there who are calling for Corporal Shalit's release.

If someone's rules of engagement include an overriding requirement that they should under no circumstances allow themselves to get captured, an absolutely certain military consequence is that the fire positions in which they engage will be of a stand-off nature and will be at a considerable distance. Indeed, I was told that the vast majority of the IDF forces that were engaged did not at any point see a Hamas fighter. If someone engages at a great distance, they can also be certain that they will maximise civilian casualties.

So, I ask the Minister to consider what happened in southern Lebanon three years ago, when, as he knows, a vast number of cluster munitions were sown over the whole of southern Lebanon—including in the civilian areas—in the 72 hours after the ceasefire had been agreed and before it came into effect. He should also consider the degree of destruction of Gaza, where there were nearly 1,500 civilian casualties—including hundreds of women and children. Against that background and the background of what I have said about the rules of engagement, which are likely to be the same in any future conflict and are likely to lead to a high level of civilian casualties, the Minister and his colleagues must look extraordinary closely at the compliance by the British Government in respect of weapons systems and the components of weapons systems sold to Israel—either directly or indirectly—in relation to the EU combined code.

Photo of Gordon Prentice Gordon Prentice Labour, Pendle

The Gaza strip is twice the size of my Pendle constituency, but it has a population 17 times as large. I think that the right hon. Gentleman is saying that it is impossible for the military to strike surgically in the circumstances to which he has referred. Is he also telling us that he believes that Israel committed war crimes during the attack in December because civilians would inevitably be caught up in the fighting in the way that he describes?

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

The hon. Gentleman is asking about an issue that can only be adjudicated on in a court of law, but he will know that I am not a court of law. What I am saying is that the way in which the operation was conducted and what I was told were the rules of engagement made it, I believe, certain that significant numbers of civilians would lose their lives—and they did.

I come to the criteria in the combined code, which is the basic policy framework for the Government. Will the Minister carry out a review of arms exports to Israel? In doing so, will he look closely at two criteria in particular and say whether the British Government are compliant? I refer him to criterion 2 (c), which states that member states shall

"deny an export licence if there is clear risk that the military technology or equipment to be exported might be used in commission of serious violations of international humanitarian law."

I also ask him to look at the Government's policy in relation to the whole of criterion 7, which states:

"Existence of a risk that the military technology or equipment will be diverted within the buyer country or re-exported under undesirable conditions."

Those are two absolutely key criteria against which the Minister should evaluate the Government's policy on arms exports to Israel.

In conclusion, the British Government may have been in breach of one or more of the EU's criteria under the combined code for some years. However, having seen what I have seen in Gaza, I am in no doubt that they are in breach of the code now.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire 3:35 pm, 26th March 2009

It is a pleasure to be involved in this important debate. We are good at making weapons and weapons systems in the UK, not least because we have a thriving aviation industry with decades of experience in the field. We are also good at producing the IT to go with those weapons and weapons systems. Some of the finest companies in the field are based in the United Kingdom.

It is no surprise that there is an enormous temptation and attraction for the UK to export weapons, which is unquestionably why this debate is so important. Arms export controls are thus vital for ensuring that we have a transparent arms trade and that corruption and bribery are stamped out. Every effort should be made to ensure that arms are not supplied to terrorist groups or misused by countries with poor human rights records. When introducing the debate, Roger Berry covered those issues in extensive detail, and the arguments do not need to be repeated. The Committee has established a good rapport with the Ministry of Defence and lobby groups in order to work for the best solutions to these problems, and I congratulate it on its body of work so far.

I would like to draw the Minister's attention to a number of issues raised in the report on which I hope he will be able to provide an update—again, some of those matters have been raised already, so I do not need to discuss them in great detail. The hon. Member for Kingswood mentioned man-portable air defence systems—MANPADS. Could the issue of the transporters of such category B weapons relate to some sort of register of arms brokers and traders more cohesively? The Minister also needs to address the open general licence issue, and enforcement and punishment issues are also relevant. How can we monitor the resale of goods to prevent weaponry from ending up being used in undesirable conflicts abroad, as has happened in Burma?

I hope that the Minister will respond to the points already made, but let me add a few of my own. We are approaching the proposed date for the introduction of the final tranche of secondary legislation under the Export Control Act 2002, which will extend controls on light weapons. Will the Minister update us on the effectiveness and progress of that legislation so far, especially in light of how British-made weaponry often still ends up in the wrong hands? I raised that concern in an intervention, because it is easy to see where an aircraft ends up, but it is not so easy to see where light weaponry ends up. If the Minister is so minded, he may admit that the tracking of light weapons and smaller weapons products is impossible. However, the Government might have come up with creative solutions to that problem. One of the hardest aspects of this whole issue is tracking small-scale weaponry and, indeed, IT systems, which are easy to move under the radar and difficult to find when they fall into the wrong hands.

The Committee has suggested previously that

"the roles of broker and transporter can be tightly linked, with the dividing line between them difficult to draw".

That is right. As a consequence, there should be an extension of the roles covered extraterritorially in category B to include transporters of those items. That might go some way towards resolving the issue, so I would welcome the Minister's views on that.

The Government's previous response to the report did not show a commitment to extending controls to transporters of category B goods. Will the Minister provide an update on that, or indicate whether there has been further consideration of the issue? Have the Government considered extending arms controls over the transporters of category B goods? I recognise that there is an economic implication and that the Government will not want to promote the potential loss of some business at this difficult time, but the cost of not taking action far exceeds the benefit of leaving things as they are due to the destabilising elements of what happens if illegal movements go unchecked.

In a similar vein, a register of brokers would also extend arms control extraterritorially. A register of all licensed traders and brokers has long been advocated, and it was discussed at length during the CAEC inquiry sessions. Belgium, France and Sweden, among others, already operate a system of registration that has the clear advantage of better monitoring and transparency. Such a system will not be perfect but, as the hon. Member for Kingswood said, sometimes we have to pass laws notwithstanding the difficulty of enforcement. If the Government are going to be true to their decade-old promise of an ethical international policy, they have to grab this bull by the horns.

The Government recognise the advantages of a register: increasing compliance, and raising the awareness of companies and individuals of the controls that they need to satisfy to get a licence, and for what they can get one. That is good. Such a system would also have the advantage that it could be linked to an offence, and that an individual or company could be struck off the register for breaking the rules. Therefore, I would like to ask whether there has been further development of the idea following the Government's response to the report, what the criteria would be for the register, what mechanism there would be for removing offenders and when that would be appropriate, whether the register would be a public document or available only to the Department concerned, and whether a registration fee would be charged and what that would entail.

The most controversial of licences to trade in arms—the open general licence—still poses many problems. It is intended to apply to low-risk goods and countries that are not problematical, but there are serious concerns that OGLs can easily be exploited. There are questions about what is done once the licence has been obtained. In theory, an individual or company could then simply act as it wanted and exploit the various loopholes, and be caught only if Her Majesty's Revenue and Customs happened to perform a spot check on the right company at the right time.

The Government's view seems to be that spot checks and monitoring would eventually bring up any breaches and that the necessary enforcement action would follow. I do not agree. I think that there needs to be more systemic intervention that will require intelligence and close monitoring of this sensitive sector. Data provided by the Export Control Organisation and quoted by the UK Working Group on Arms indicate that OGL registrants constitute the largest and fastest growing body of users of the UK export control machinery. The number of licence holders has risen in just four years from 779 in January 2003 to a staggering 3,114 in December 2007. Therefore, while the number of spot checks and compliance officers may increase, the rise in licence holders minimises their effect. Indeed, as shown in the report, the number of goods seized by HMRC has fallen from 120 in 2000 to 44 in 2006.

While most of those licences involve relatively non-sensitive goods being exported to uncontroversial end users, in certain circumstances they can be used to export lethal military and security equipment to sensitive destinations. I do not believe that the 60 per cent. fall in goods apprehended means that there has been a 60 per cent. fall in breaches of compliance, although the Minister may have a more optimistic view. I suspect that many organisations and individuals have found a way to get through.

On top of that, the lack of enforcement and penalties linked to breaches was found to be a concern, even if breaches were minor in character. This is really important: to date, the only significant custodial sentence was through the successful prosecution of John Knight of Endeavour Resources Ltd, who was sentenced to four years for trading arms from Iran to Kuwait without a licence. As the first successful enforcement under the controls, it was widely welcomed and considered to be an extremely important step. However, Saferworld has rightly commented that evidence that emerged from the case raised serious concerns about the effectiveness of the licensing and enforcement regime as a whole, and the willingness of the Department for Business, Enterprise and Regulatory Reform to pursue clear breaches of the 2002 Act.

To some extent, the situation is understandable. One of the main difficulties for a successful criminal prosecution is that the burden of proof is extremely high, as the prosecutor is required to disprove all possible defences. Civil penalties, on the other hand, would offer an easier alternative with a slightly reduced burden of proof. Will the Minister outline the progress of the Government's endorsement of that recommendation? It may not be perfect, but it would probably broaden the room for manoeuvre to enforce legislation.

As has already been pointed out, the Committee contrasted the US and UK systems. Non-compliance with the UK system can actually make economic sense for UK exporters, whereas the harsh penalties in America never make that the case. That suggests that the Government urgently need to look at the case study of another country, not very different from ours, where the system is designed to work better.

We have heard about various re-export breaches. I shall not repeat them, but I look forward to hearing what the Minister has to say about them. The infamous case of the maritime patrol aircraft that were sold by the UK to India, and then resold to Burma, is an example of what can happen if we are not careful about re-export conditions.

Serious concerns remain about the lack of a re-export clause. By comparison, that is a standard element of all US contracts. If there were a blanket clause rather than a subjective choice based on the recipient country, one country would not be treated differently from another, which would negate claims of possible insult to other states. Additionally, given the long life of many military goods, it is important to note that the stability, administration and character of states can change dramatically over, say, 20 years, but the goods could still be perfectly usable and available for re-exporting. That mitigates strongly in favour of a blanket clause.

Have the Government given any further consideration to implementing a single-action clause, as is used by Germany? Such a catch-all clause could give the Government far more flexibility to deal with fast-changing and complex goods. One thing is certain: something has to change. The Government are obligated to respond to the concerns.

The European Union's role also remains crucial. The EU code of conduct was adopted as a common position in December 2008, which means that it is legally binding on member states. The code's eight criteria that any arms sale should satisfy include respect for the UK's international commitments, in particular sanctions decreed by the UN and the EU, and other international obligations, and respect for human rights and fundamental freedoms in the country of final destination. However, the licensing of defence exports still remains at the discretion of member states. Will the Government offer a commitment to the code of conduct, which I am sure all parties in this Chamber want? It seems sensible and consistent with applying common criteria across the EU as a whole.

I cite a concern that comes from the overall sense that this sector has enormous vested interest in finding ways through. With the best will in the world, hard-pressed companies will seek buyers and will sometimes be tempted not to ask too many questions about what those buyers want to do with the products. We have made some specific points, but the macro issue is that if there is one sector that is open to corruption, it is this one. If one looks at the mechanics, one understands that perfectly honourable UK companies could end up indirectly providing goods to dishonourable clients. That is why these matters are so important.

I congratulate the Committee on the insights that its work has provided. The report is exhaustive, precise and well researched. The Committee's work is vital if we are to prevent weaponry from ending up in the wrong hands. To that extent, the Minister is lucky, because this is an action-oriented debate. As far as I can tell, it is not particularly partisan, but concerned with closing loopholes. That is consistent with ensuring that an ethical foreign policy is not just an aspiration, but a fact.

I end with a disappointing and saddening statistic. I am told that for every £2,000 spent on arms, £1 is spent on conflict resolution. I predict that, for many reasons that we understand, we will continue to sell weapons of war, but the greatest single export will be the tools of conflict resolution because human beings, being the creatures that they are, will stop buying arms only when they find an easier and less violent way to solve their natural but tragic conflicts.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development 3:50 pm, 26th March 2009

It is good to serve under your chairmanship, Sir Nicholas, and to follow Lembit Öpik, and it is nice to see the Minister in his place today.

This has been an interesting debate, and I sincerely congratulate Roger Berry on the way in which he chairs a quite difficult Committee. It is not easy to chair a joint Committee of four Committees, to secure a unanimous agreement and to come up with a constructive report within the constraints of the Official Secrets Act, which we have all heard about today. So, I welcome the opportunity to reply to this debate on behalf of the Opposition for the second time running. It is a pity that more right hon. and hon. Members are not present, considering its importance.

This country should have three arms exports controls objectives: first, that our export policy is concurrent with our global status as a trusted and reliable trading partner, but equally, as a nation that recognises its role in fostering and developing peace and upholding the highest standards of human rights; secondly, that the reporting and scrutiny of our arms exporters occurs without providing an unnecessary burden on the industry, which is a vital part of our economy; and thirdly, that our export policy considers the interests of our defence exporters.

In recognising the need for the comprehensive scrutiny system that we have in place, we must not underestimate the importance of our defence exporters to this country. Although it is right that we scrutinise, we must not ignore the skills of those in the industry or the excellent quality of the equipment that they produce. It is of huge benefit, not least to our own armed forces. Defence exports assist the UK in strengthening our relations with allies and in reducing the unit cost of equipment to our own armed forces. Given that our defence manufacturers produce some of the most respected military hardware anywhere in the world, and given the current need for such equipment within our overstretched armed forces, that point simply cannot be ignored. The capacity to produce the best kit for our troops is dependent on a world-leading and thriving defence export industry.

Figures for 2006-07 show 25,000 jobs dependent directly on the defence export industry, with a further 30,000 people indirectly employed in the supply chain, as sub-contractors or as suppliers, as part of a £5 billion industry. The industry is very important to this country, and it is therefore equally important that we strike the right balance with our regulatory regime. I have just returned from India, where I found that the country spends 2 per cent. of its GDP on defence, an increase of 34 per cent. on last year, and plans to spend $29 billion on major acquisitions over the next five years. BAE Systems is targeting that major industry, and it will be of considerable benefit to this country, notwithstanding the remarks made by my hon. Friend John Bercow about India's re-export of arms to Burma. Our regulatory regime should be well capable of dealing with that.

Photo of Roger Berry Roger Berry Labour, Kingswood

Does the hon. Gentleman therefore conclude, as the Committee concludes, that the way to deal with that issue is to include in the licence agreement a re-export clause of the kind to which I referred?

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

Yes, absolutely. I am grateful for the Committee Chairman's intervention, and I shall come to that point later in my speech.

I shall not rehearse what I said about the historic nature of the debate when I intervened on the hon. Gentleman. The Minister will have heard it, and I shall not quote from the report, which makes criticism of the issue, but I hope that in future the Government will produce a reply, so that the debate can include consideration of the reply and be more up to date.

There was some criticism of the statutory instrument that Des Browne introduced on sting sticks, because only 14 days' consultation took place. The Government must think carefully about how they respond to such matters and provide the Committee and others with adequate time to reply not only to their responses but to statutory instruments.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

I do not understand my hon. Friend's point, because the Government's response to the report that we are debating was published in November 2008.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

I was not going to, but to make the point completely clear I shall quote from the report that the hon. Member for Kingswood produced and in which my right hon. Friend Sir John Stanley participated. It says:

"In the past the Government produced the annual report about seven months after the end of the calendar year around the time (in July) that we are usually finalising our Report. This has meant that we have not been able to carry out any detailed scrutiny of the annual report until the following year. This year the Government indicated that it would produce the 2007 Annual Report on Strategic Export Controls in May 2008. In the event it was not able to produce the 2007 report by the time that we concluded our deliberations. The latest indication we have is that the 2007 Annual Report will be produced in July. This is no improvement on previous years."

I hope that that clarifies the report for my right hon. Friend.

The Defence Export Services Organisation has been moved from the Ministry of Defence to UK Trade & Investment within the Department for Business, Enterprise and Regulatory Reform, but today's debate has not mentioned how the licensing regime affects DESO, whether DESO is happy with the regime and what criticisms DESO has of it. In considering these regulatory matters, one needs to take particular account of the Government organisation that is responsible for our defence exports.

Two points that were raised in last year's debate still feature in this report, and the Minister of State, Department for International Development, did not comment on them when he responded last year. I have already commented on the timings of the Select Committee's reports and, on intervention, about the issue of defence attachés, but the report says that

"all of the departments concerned with the scrutiny of export licences need to keep under review whether the cutbacks in defence attaché posts is having a detrimental effect on the UK's export controls."

Indeed, the then Secretary of State for Defence, the right hon. Member for Kilmarnock and Loudoun, said in evidence on 17 January 2008 that only about 5 per cent. of a defence attaché's role was associated with any aspect of that work. But, as I stated last year, no one knows when that 5 per cent. of time occurs, given that 100 per cent. of a defence attaché's time is spent dealing with defence matters.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

I wholly agree with my hon. Friend about defence attachés, but I offer a further point of clarification to him. He will recall that, after intervening, he was rebuked by the hon. Member for Kingswood for advocating additional public expenditure, but does my hon. Friend not agree that that was a mistake on the hon. Gentleman's part, because the issue was about a transfer of expenditure from the Foreign Office to the Ministry of Defence, which, in public expenditure terms, was neutral? I am sure that what my hon. Friend required—a transfer back—would be equally public-expenditure neutral.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

I entirely agree with my right hon. Friend. That is a very helpful intervention all round, so I am grateful to him for it.

I shall move on to open general export licences. The UK Working Group on Arms reports that

"in 2004, 5 per cent. of OGELs were seen to be misused; in 2005, 8 per cent. were seen to be misused; and in 2006, 11 per cent. That is, just over one in 10, from compliance visits, are shown to have problems with their use."

Indeed, David Hayes, the chairman of the Export Group for Aerospace and Defence, felt that it was a consequence of ignorance about the controls and a lack of concern for the consequences of non-compliance—an issue that the hon. Member for Montgomeryshire raised.

That feeds nicely into the issue of enforcement, which the hon. Gentleman also raised. It is surely one of the most important issues, because, without effective enforcement, the rest almost become meaningless.

This issue is worthy of debate, as Mark Pyman notes in his evidence to the Commerce Department in the USA, when saying that in the late 1990s

"50% of the complaints were about...bribery, even though that is only about 1% of the world trade".

But of course that 1 per cent. is important.

Rightly or wrongly, a large number of people view the defence trade with suspicion, because of allegations of bribery or because of the equipment that is traded. A good way of redressing this balance in the eyes of the public is to offer sizeable penalties for breaking the rules, as hon. Members have said. Paragraph 51 of the report notes that David Hayes from EGAD said:

"non-compliance with the UK system can make economic sense but non compliance with the US system never makes economic sense."

That quote was also used by the hon. Member for Montgomeryshire to prove that the US system is tougher than the UK system. Does the Minister agree that the potential damage to this business caused by breaching the rules would be a far greater deterrent than any excess legislation or red tape?

The Committee makes the sensible suggestion, in paragraph 117, that

"in a case where subsequently an exporter is convicted of corruption the Government revoke all his or her export licences."

That was not mentioned by the Committee Chairman, but it is a good idea. Is the Minister still actively considering that? The Committee is also right to suggest that the Government should

"set out the timetable for bringing a fully searchable and regularly updated database of all licensing decisions into operation and publish details of its functionality and operating arrangements", as recommended in paragraph 85. The Government's response suggested that this would occur in early 2009. Perhaps the Minister will give an update and say exactly where we have got to on that project.

Cluster munitions were mentioned by the Committee Chairman, I think. We Opposition Members support the agreement that was reached at Dublin and the treaty's subsequent ratification at Oslo. Cluster munitions have caused far too many indiscriminate casualties over the years. We saw that, as has been mentioned, in Lebanon; the maiming and killing caused by cluster munitions was a disgrace. However, it is also essential that the operational capability of our armed forces and their safety in a battlefield situation are not compromised. Therefore, alternative solutions need to be found.

In an intervention, the Chairman raised the issue of re-exports, which is a serious matter for concern, particularly in view of the allegations relating to India's re-exporting maritime aircraft to Burma, which we need to consider carefully. The Committee suggests at paragraph 40

"that it should become a standard requirement of licensing that export contracts for goods on the Military List contain a clause preventing re-export to a destination subject to UN or EU embargo."

That seems to me to be not only eminently sensible but a vital requirement. If there is an EU or UN embargo, why on earth are we even contemplating that somebody should be able to re-export arms to such regimes?

In his evidence, Mr. Doddrell, the director of the Export Control Organisation, noted that the

"preferred approach for some time has been to factor all these considerations into the initial licensing decision".

That is the Government's procedure at the moment, so perhaps the Minister will tell us whether that remains their preferred option or whether he would be prepared to put in a clause physically preventing re-export to those countries with sanctions on them. There remains the concern that items may not be sold on for maybe 10, 15 or even 20 years, until the first trading partner has finished with them. The threat of re-exporting is now far easier to assess, through predicting how a country will behave in 20 years' time. Given our better knowledge these days, collected on the ground, surely it should be possible to assess such matters.

Extraterritorial and dual-use regulations, internal agreements and end use have been mentioned. The report also raises other hot issues in terms of arms exports in respect of extraterritoriality and dual-use regulations. These areas are obviously a matter of concern and, as with previous subjects, we should not overlook them. But it is imperative that we remember that the British defence industry already adheres to some of the highest trade standards in the world.

As a nation with a proud heritage and respect abroad, I feel that our high standards are well recognised abroad. Although we must not take our eyes off our own exporters, it is vital that we expend a significant amount of time continuing to pursue agreements with our partners in the EU and beyond—I am sure that the Minister will say something about this in his summing up—without which continued domestic regulations and restrictions will put British defence exporters at a disadvantage. That will happen if we have a higher regulatory regime than is common for the rest of Europe. Furthermore, that will enable funds to go into the hands of nations without the principles that we adhere to, which will then have the funding to produce ever more abhorrent weapons, leaving our own armed forces, as a corollary, less well equipped to respond to potential threats. Surely we are in the business—I encourage the Minister to say this in his response—of trying to encourage others to live up to the highest standards that we set ourselves.

Although good work has obviously been done with the international arms trade treaty so far, there remains much to be done in ensuring a high-level consistent approach to arms trading across the globe. The arms trade is worldwide and there is a clear limit to the effectiveness of national controls. Perhaps the Minister will say something about the progress on the arms trade treaty.

Criterion 8, sustainable development, remains a key feature of this report and merits further consideration. Last year, as has already been mentioned by my right hon. Friend the Member for Tonbridge and Malling, Oxfam produced a report entitled "Africa's Missing Billions", at the heart of which was the fact that armed conflict costs Africa around $18 billion per year, seriously derailing development. Some 95 per cent. of the weapons and ammunition used comes from outside Africa. Interestingly enough, because of our arms control regime, British arms exports to Africa in 2007 totalled a mere £44 million. That is still a substantial figure, but small in relation to the whole trade.

There seems to be quite a flaw in scrutiny when an export that should be subject to assessment by the Department for International Development as part of Criterion 8 can be "sidestepped", to use the words of the Committee, if the end user is a private company, seemingly regardless of the company's ties to the Government. Perhaps the Minister, with his DFID and DBERR hats on, will say something about that.

Once again, I congratulate the Committee Chairman on this excellent report. He has done well to get agreement across the four Committees, but—there is always a but, isn't there?—it is a shame that so many of the issues discussed last year remain as part of this report. Given the importance of the subject of the debate, it should be up to date, highlighting again the importance of the defence industry to our country without ignoring the importance of scrutiny. Tied to this, there is concern that the report gives too much weight to the views of the public sector directly tied to the industry and non-governmental organisations, but contains little about the views of the defence exporters, which, I have to say to the Committee Chairman, is a weakness. Where are the views of defence exporters and the Defence Export Services Organisation? What do those bodies find are the problems with this licensing regime? It would be interesting to hear from them about those problems.

Photo of Roger Berry Roger Berry Labour, Kingswood

Does the hon. Gentleman acknowledge that the report publishes the minutes of the evidence sessions and that every year we take evidence from the defence manufacturers—and their views are there? I shall be grateful if he lets me know about any area in our recommendations where we have ignored the views of the defence manufacturers.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

I accept that the evidence is in there and published, but their evidence is given less weight, shall we say, in the conclusions than that of others. The Chairman looks somewhat puzzled. Inevitably, it is a matter of judgment as to how the reader sees the report. I came to my conclusion on reading the report, although I could be mistaken; I do not know. Nevertheless that is how it is.

The report is right to highlight hon. Members' key areas of concern for debate, but where there is a shortage of case studies—my right hon. Friend the Member for Tonbridge and Malling mentioned this in respect of the case of the EU consolidated criteria—one needs to be careful about what conclusions one comes to. My right hon. Friend came to the conclusion that, with the possible exception of arms exports to Israel, this country is broadly compliant with those criteria, because of the lack of evidence to the contrary. That should be a guiding star to us. Unless there is clear evidence to the contrary, one should assume that things are working. We must continue our drive to ensure higher global standards. The arms trade is global, and unilateral arrangements in this country will not necessarily halt that.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

For the record, I made it clear that, apart from Israel and China, I thought that across the board the Government should further examine component control in relation to EU criteria.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

Without being able to paraphrase the whole of my right hon. Friend's speech, he is entirely right to raise components, which are an important part of the arms trade and should be regulated as such, in the same way as an entire fabricated article. One component might be the important one in making the entire fabricated article effective. I entirely agree with my right hon. Friend, and I look forward to hearing the Minister.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury 4:10 pm, 26th March 2009

It is a pleasure to serve under your chairmanship, Sir Nicholas. I am pleased to have the opportunity to respond to the issues that have been raised during this high-quality debate. I congratulate my hon. Friend Roger Berry on the way in which he has carried out his role as Chair, and the constructive way in which he presented the reports. As always, we have had some thoughtful contributions from Sir John Stanley and Lembit Öpik and Mr. Clifton-Brown, who speaks for the official Opposition.

I appreciate the acknowledgment by my hon. Friend the Member for Kingswood that substantial progress has been made on arms export controls over several years. I also appreciate the comments from the right hon. Member for Tonbridge and Malling saying that, in broad terms, the UK is in pretty full compliance with the EU's consolidated criteria. He went on to raise issues concerning components, China, Israel and Palestine, and I will come to those shortly.

I support the comments made by the hon. Member for Cotswold in reference to the defence industry's importance to the United Kingdom, not only as the bedrock of providing high-quality goods and services to our armed services, but through the role that arms exports and the jobs associated with them play in the UK's economy. A key to the continuing success of the industry is good regulation, which is where effective licence controls are relevant. The UK can be proud of the standards that it sets and maintains, but it is important continually to be challenged. That is the purpose of this debate, and hon. Members do that regularly throughout the year. We may not always agree—I shall point out some areas where there are honest disagreements—but we will always engage, listen and consider thoroughly the reports that come from Committees.

Hon. Members will be aware that we are coming to the end of the post-implementation review of the controls introduced in 2004. We are grateful for the input of the Committees, NGOs and industry stakeholders. All parties were struck by the collaboration that we managed to achieve together, and I look forward to that continuing. We will soon have completed implementation of most of the changes coming out of the review. We have taken significant steps to strengthen export controls where there has been concern, and to fulfil commitments and our responses to the public consultation. Hon. Members will be aware that we have introduced controls on sting sticks, and fully extended extraterritorial controls to UK persons anywhere in the world trading in small arms and man-portable air defence systems—MANPADS. We changed the controls on cluster munitions, subjecting them to the strictest controls, and we have controlled both extraterritorial trading by United Kingdom persons and trading within the United Kingdom, in addition to the full range of support activities. On 6 April, legislation will come into force to extend the fully extraterritorial trade controls to light weapons and to tighten controls on the transport of those weapons and similar goods of heightened concern between overseas destinations, and controls on their transit or transhipment via the UK.

Officials have started work on pursuing our commitments on torture and military end-use controls at European level. Thanks to the positive and constructive engagement of our stakeholders, we have a strong package that will significantly enhance our controls where concerns have been expressed for a considerable time.

I want to refer to some significant successes over the past year or so, and to respond fully to the many points that have been made during this debate. I was pleased that when I appeared before the Committee, I was able to announce that we were proceeding with plans for the introduction of civil penalties. I am firmly convinced of their value, and hope that we can obtain the necessary consensus in government so that the process of introducing a regime can begin in earnest. We have also introduced procedures for companies or individuals to have their registration for open general export licences withdrawn if they have a poor compliance record, or for other appropriate reasons, such as being convicted of export control-related offences. The hon. Member for Cotswold raised that point.

There have been two major successful prosecutions. The hon. Member for Montgomeryshire mentioned John Knight, who was convicted of transferring machine guns between Iran and Kuwait, and sentenced to four years' imprisonment with a confiscation order of £53,000. Mehrdad Salashoor was convicted of illegally exporting to Iran navigation equipment that could be adapted for use in missile guidance systems. He was sentenced to 18 months' imprisonment with a confiscation order of £433,000.

On enforcement activity, we have increased the number of awareness events by 10 per cent. and the number of company training visits by 80 per cent. We are developing, and are about to launch, an online searchable database to improve access to publicly available licensing information. The industry and NGOs have been involved in the development and testing of the database, and we have offered to organise a demonstration for the Committees.

We introduced SPIRE on time and within budget, which was an outstanding achievement. Despite that introduction and a 35 per cent. increase in applications, we have exceeded performance targets over the past 12 months.

Hon. Members will be aware that a directive to simplify the terms and conditions for the transfer of defence-related products in the EU was adopted by the European Parliament on 16 December. It will now be considered for adoption by the Council of Ministers. Due to the efforts of the UK delegation, which included the Export Control Organisation, and representatives negotiating the directive, the Government believe that there will be few practical implications for the UK export licensing system, which remains robust.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire

I listened with interest to the Minister's comments about enforcement. I have been involved in a case—I cannot give names, because the case is continuing—in which people have been accused of terrorism and exporting equipment to a certain part of the world, allegedly for terrorist activity. It is obvious to me that the claim is preposterous, and I am pretty sure that they will be found innocent, but the case highlighted the difficulty of determining end use. Does the Minister have any observations—perhaps he is coming to this—on how we can enforce the matter fairly and more comprehensively so that we do not arrest the wrong people? I do not believe that the two people he cited are the only two who have broken the law.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I appreciate the hon. Gentleman's point, and I will indeed say more about end use, but first I want to speak about progress on the introduction of an international arms trade treaty.

As hon. Members will be aware, a resolution co-sponsored by the UK resulted in the UN mandating work on a treaty. Earlier this month, the first of two sessions of an open-ended working group on an arms trade treaty took place at the UN in New York. The second session will take place in July 2009 and the working group will discuss areas on which there could be consensus. That is a key step towards achieving a globally agreed and robust arms trade treaty of a high standard, and that point was raised by several hon. Members.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

Will the Minister give an indication of the outstanding issues on the international arms trade treaty? What issues need to be resolved in order to establish such a treaty?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

If I were to do that, we would run out of time before I had responded to all the other points raised during the debate. As the hon. Gentleman will be aware, it is a long-standing ambition of the United Kingdom to negotiate an international arms trade treaty. We have made some progress in getting discussions up and running. They still have a long way to go, but certainly the United Kingdom will continue to be enthusiastic about promoting an arms trade treaty.

Photo of Roger Berry Roger Berry Labour, Kingswood

I am full of praise for the Government's support for the international arms trade treaty and what they are doing. That is a very difficult task—no two ways about it. What does the Minister think about the concerns that NGOs have raised about the possibility of the scope of the treaty being so narrow as not to be worth supporting? As he knows, that concern has been expressed. Are the NGOs premature in their judgment, and if so, why?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I know that concerns are expressed by NGOs about the potential scope of the arms trade treaty. The position of the UK Government is that we want a treaty that has high standards and we will continue to push that as a policy. We certainly do not want to give up on what we believe is an important process. We will maintain a high level of ambition in the discussions that have been taking place, and will continue to take place, on the issue.

My hon. Friend the Member for Kingswood also raised the issue of a register or pre-licensing registration system. As he will be aware, the Government are not opposed to a register in principle. John Bercow suggested—I think that he has done so twice now—that we have kicked that issue into the long grass. No, we have not. In practice, we already have a register of traders. We have a comprehensive database and can use it at any time to show who is using trade control licences. We can use that information to direct our awareness-raising or compliance-visiting activity. What we do not have is a pre-licensing registration system under which traders must be vetted before they can be registered.

The ECO considered the issue closely and concluded that at this stage, the time is not right to introduce a full registration system. We are happy to consider the issue again once we see how well the initiatives that we are currently pursuing—such as clamping down on those who misuse open licences and focusing our awareness activity on traders—work in practice. It is right that we take time properly to assess the effect of those new initiatives, particularly bearing it in mind that we would be talking about a regulatory burden in introducing a pre-licensing registration scheme.

Photo of Roger Berry Roger Berry Labour, Kingswood

Is the Minister saying that the Government have decided, therefore, at this stage that there will be no register, but that that decision might be reviewed in the light of future circumstances? I ask the question because my understanding was that the Government were still reviewing whether they supported a register, and I think that the Minister has just said that the answer is no, they do not support a register.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I am saying that we believe that at this stage it would not be appropriate to proceed with a pre-licensing registration scheme. We think that that would impose a burden on legitimate businesses and we want to see how the other actions that we are taking will work. We will review that decision when we have more information. It is right to take time to make that assessment.

My hon. Friend and others raised the important issue of end-use monitoring. Our position remains that the best means of ensuring that goods are not diverted is to conduct a rigorous assessment at the licence application stage. That includes careful examination of the information on the proposed end use and end user of the goods. As hon. Members will appreciate, UK diplomatic posts are regularly asked to check the accuracy of the information in the end-user documentation submitted in support of an application. Should that assessment identify an unacceptable risk, the application will not be approved.

The primary purpose of any monitoring of equipment once it has left the UK is to generate information to assist the risk assessment of other current or future applications that are similar. The Government believe that we already have adequate systems in place to do that. The use of military equipment in destinations of concern is monitored by UK overseas posts using a variety of information, including from the media, NGOs and intelligence reports. Those posts have standing instructions to report misuse of UK-origin defence equipment.

Given that the ECO issues about 10,000 individual export licences a year and that, in addition, a substantial volume of exports are made under cover of the open individual and open general export licences, the Government do not have the resources to monitor routinely end use overseas. It simply would not be practical for every export to have a British civil servant attached to it or to have a British person in post, meeting it at the border.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Order. Is the Minister giving way? Yes, he is.

Photo of Roger Berry Roger Berry Labour, Kingswood

I am extremely grateful to the Minister. When have the Committees ever suggested such a thing? We never have. We have said that most of our exports, for example, go to NATO allies and others and we have no serious questions in that respect. There are a number of destinations, however, where rather more end-use monitoring than the Minister admits takes place would perhaps be helpful. Will he please not caricature the Committees' recommendations in that way? It is deeply offensive.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I apologise to my hon. Friend if I have offended him in any way. I was simply trying to make the basic point that the vast majority of export applications are uncontentious—there does not need to be comprehensive end-use monitoring—but in other situations a substantial resource commitment would be involved.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

The hon. Gentleman, to whom I will give way in a moment, mentioned defence attachés. As I think he is aware, defence attachés are tasked with making assessments of export licences as part of the licensing application process. The Government remain of the view that the best way to ensure that the system operates effectively is getting it right at the licence application stage of the process, rather than attaching civil servants to exports of particular goods.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

I agree that the best way of dealing with the matter is at the licensing stage, but surely the pragmatic way of enforcing the end use is this. Officials, whether in the Minister's Department, the Foreign Office or the Ministry of Defence, will know perfectly well the countries where there is likely to be a problem and will know perfectly well the type of arms exports that are likely to be re-exported to those countries. Therefore, the effort should be made in the countries where there is likely to be a problem. In that way, the finite resources that any Government will have available to them can be used more effectively.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

What the hon. Gentleman suggests would be a significant departure from current practice. We have debated the matter on a number of occasions, and the Government remain of the view that getting it right at the licensing and application stage must be the most sensible, logical, proportionate and cost-effective approach.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire

I realise that the Minister has been intervened upon many times on this subject, but this is one of the key areas. Accepting that unscrupulous arms purchasers may be able to buy their weapons elsewhere if they cannot get them from the UK, does he nevertheless accept that some unscrupulous traders in this country may make the calculation that the odds are rather good? The profits are large, and the chance of being apprehended is relatively small. They are willing to take the risk. I stress again that there have been two significant prosecutions in the entire industry in recent times. It is not many.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

It is not many, but we are not aware of widespread abuse of the UK's export licensing regime. We have tough standards, and I like to believe that unscrupulous people of the sort that the hon. Gentleman mentions would not get through our licensing application process.

I turn to the question of tightening controls on the export of non-controlled goods through enhanced military end-use control arrangements, rather than additional legislation. We will be engaging with industry and NGO stakeholders in order to obtain their views on our proposals, so that we can ensure a level playing field throughout Europe. It is envisaged that an enhanced military end-use control would cover a wider range of goods than at present, and that it would apply to goods going to sensitive destinations rather than only to embargoed countries as at present. The hon. Member for Montgomeryshire spoke of a single action clause. My understanding is that what we propose for the enhanced EU military end-use control is similar.

As for the extension of extraterritorial trade control coverage from small arms and light weapons to other weapons or even the entire military list, the House will be aware that we are committed to and have prioritised the introduction of controls based on evidence of the associated risk. We have asked NGO and industry stakeholders to consider the case for extensions of controls to be applied to even more military goods. They hope to submit a proposal shortly, and we will meet them to discuss it. We will, of course, report on the proposal once it has been evaluated. As with all new regulation, we need to be satisfied that there is sufficient evidence of a problem to justify extending controls in that way, and that the additional burden on business will be proportionate to the risk.

My hon. Friend the Member for Kingswood also raised the question of anti-vehicle land mines. I am aware of the concerns that have been expressed about their being placed in category C of the new trade controls, rather than category B. Indeed, the matter was discussed when I gave evidence to the Committees. Their status as category C goods means that their export from the UK remains fully controlled. The principal effect of moving them to category B would be to control trading activities by UK persons operating outside the UK. No country has made a specific international commitment to make that change. Our commitments relating to the verification and monitoring systems governing the transfer of anti-vehicle land mines will be unaffected, regardless of whether they are in category B or category C. No doubt, however, we will continue to pursue the matter.

I wish to discuss briefly the no re-export clauses, a subject that was raised by several Members and mentioned during my appearance before the Committees. The Government remain unconvinced that it is necessary or feasible to require overseas entities to seek permission from the UK authorities in order to re-export items that are already outside the UK. Such a system would be onerous to operate and extremely difficult to enforce outside the UK's legal jurisdiction.

In reality, re-export clauses would not increase our real-world powers; and we factor the risk of diversion or re-export to undesirable end users into our risk assessment at the application stage. We would not license the export unless it was consistent with the consolidated criteria. When applying for a seal, all exporters have to provide an undertaking from the end user that the goods will be used for the purposes stated in the undertaking. If the export is going to a consignee who intends to hold the goods in stock against future orders, he must state whether the goods will be re-exported from their original destination. In the latter case, that is factored into the licensing risk assessment.

Photo of Roger Berry Roger Berry Labour, Kingswood

I am grateful to the Minister for giving way; he is being generous with his time. I do not doubt for a second the professionalism and commitment of the officials who make such decisions, and I do not doubt that it is best to do things properly at the beginning when deciding whether to grant a licence. However, examples have been given to show that, on the best information possible, it is still the case that arms can be exported to country A and subsequently from country A to a destination about which nothing was known, and one that we would have been appalled at if we had known. A re-export clause, as used by other countries, would surely send the clear signal that that would not be acceptable, and that we would re-examine their future licence applications far more rigorously. Why can we not do that?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

In replying directly to my hon. Friend, I reiterate what I said earlier. It would not increase our powers in the real world to deal with the problem. It would be extremely difficult, if not impossible, to enforce it outside the UK's legal jurisdiction. It would also be onerous to operate. I share my hon. Friend's objective; I do not want to see exports going to places that they should not. At the moment, as I said, the licensing application process includes getting an undertaking from the end user that the goods will be used for the purposes stated; and various safeguards are built in. If an exporter has been found to have been involved in exporting to an embargoed destination, that will be taken into account when considering future licensing applications.

Photo of Lembit Öpik Lembit Öpik Liberal Democrat, Montgomeryshire

I support what was said by the hon. Member for Kingswood, the Committee Chairman. We already have a model for that, the one used by the United States. The US is a free capitalist market, yet the US believes that it can be enforced. Surely, the sanction is that if the clause is violated, it will cause obstacles to further trade. That, in itself, should be a deterrent for major customers—usually nations—regarding violating the clause. Why does the Minister believe that the UK cannot benefit from a provision that is thought by the US to be effective?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I have explained why I think it would be difficult, if not impossible, to enforce that outside the UK's jurisdiction, and I have nothing further to add. However, when licences have been issued but information subsequently comes to light of an undesirable re-export, we have the power to revoke the licence under secondary legislation. The impact of doing so would obviously be limited if the goods had already been re-exported, but we would be able to factor that information into subsequent licensing decisions.

I turn to some of the points made by the right hon. Member for Tonbridge and Malling, as well as to picking up on points made by my hon. Friend the Member for Kingswood and others. The right hon. Gentleman raised the question of components. He spoke specifically about F-16s, Apache helicopters and unmanned aerial vehicles. When we are talking about components that potentially have a dual use, there can be a risk of diversion. In some clear cases, such as those involving head-up displays, which he mentioned, components have been incorporated into systems in a way that causes extreme concern.

I cannot, as the right hon. Gentleman asked, undertake today to review our policy, but I shall give the matter some consideration and report back to the Committee on whether, based on our evidence, a case could be made for reviewing our procedures.

Photo of Roger Berry Roger Berry Labour, Kingswood

The Minister acknowledged that, in recent years, licences had been granted for the export of head-up display units in the full knowledge that Israel would be the ultimate end user. In the light of what has happened in the middle east in recent years, does he believe that the policy should be subject to scrutiny, or only the process?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

In response to the right hon. Member for Tonbridge and Malling, I said that I would consider the case for a review of the policy on the export of components. We will respond to the Committee when we are in a position to do so.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

Will the Minister confirm whether the Committee could, if it so wished, put into the public domain the entire text of his letter on 19 February?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I cannot confirm that now, but I shall ensure that the right hon. Gentleman receives an answer at some point. As he will appreciate, I receive advice on what material should be restricted, and although it is appropriate to continue this discussion, it would not be right to give that permission without seeking further legal advice.

The right hon. Gentleman mentioned China's human rights record. I would like to stress that, on every appropriate occasion, the UK Government raise with China its human rights record. Its various human rights failings are well recognised and reported on through the media, and the annual human rights reports issued by the Foreign and Commonwealth Office indicate continuing concerns about human rights practices in China, while recognising that progress has been made. He also mentioned capital punishment, although I do not think that he was suggesting that the UK was exporting to China equipment that might assist it to carry out executions. He will be aware that the UK takes a clear view against capital punishment, as we make extremely clear in all international forums.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

I asked the Minister whether he would conduct a very carefully considered review of whether this substantial trade with China, as shown in EU figures, is fully compliant with the terms of the EU combined criteria. For example, is he satisfied that every item that has received a licence from his Department is compliant with criterion 2(a)? That states:

"Member States shall...deny an export licence if there is a clear risk that the military technology or equipment to be exported might be used for internal repression".

He might wish to write to the Committee about that as well.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

The Government rigorously assess all licence applications for exports to China and other countries, and we have no reason to believe that any of our decisions have been wrong, so no case could be made for a review.

Many hon. Members have rightly taken a strong and close interest in defence exports to Israel, which is entirely understandable, given what happened in Gaza recently. I can only repeat what ministerial colleagues have said many times before: the licensing criteria must be the basis of all our decisions. If issuing a licence would be inconsistent with those criteria, the licence will be refused. That policy has remained constant over many years—it has not changed because it has not needed to. However, the circumstances to which the risk assessments are applied do change. As the Committee knows, the circumstances at the time of the application are taken fully into account when decisions are made.

Not all licences granted for exports to Israel are for equipment that will remain there. Many involve equipment for incorporation into larger equipment and onward export to a third country. Also, many are for dual use rather than military items. Overseas posts have standing instructions to report any misuse of UK-supplied equipment, and should any relevant information come to light, whether through the media, non-governmental organisations or intelligence reports, it will be taken into account when assessing future licences. Those issues might also be raised with the authorities in the country in question. Hon. Members will be aware that the FCO will shortly make a statement, and on 4 March, the Minister of State, Foreign and Commonwealth Office, my hon. Friend Bill Rammell, appeared before the Committee. What he said then remains our position.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown Shadow Secretary of State for International Development

With respect to the Minister, his remarks have been slightly inconsistent. He said that a re-export clause was impossible, because it could not be legally enforced or policed. How, therefore, does he expect to police a licence allowing the export to Israel of, for example, motors for unmanned aerial vehicles to be re-exported to a third country?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

The hon. Gentleman takes us back to end-use monitoring, as opposed to assessments during the licensing application process. Guarantees of use will be given, and I see no inconsistency here. Re-exporting is potentially a very difficult issue. Mention was made of Indian re-exports to Burma. Those are of grave concern, and those concerns are factored into licensing decisions. However, the re-export to end-use destinations such as the United States of components supplied to Israel, as happens quite a lot, would not necessarily cause the Government heightened concern.

Photo of John Stanley John Stanley Conservative, Tonbridge and Malling

May I respond to what the Minister said to me about a review of policy towards Israel? He spoke as if the policy is set in stone and does not take into account events—particularly recent events. Does he not agree that it is incumbent on him and his colleagues to look at recent events and consider whether the uses that have been made by Israel of military equipment are still compliant with EU criteria? Again, I refer him to criterion 2 (c), which says that member states shall

"deny an export licence if there is a clear risk that the military technology or equipment to be exported might be used in the commission of serious violations of international humanitarian law."

Does the Minister not agree, therefore, that when he or the Secretary of State makes the promised statement, it will be incumbent on the Government to set out whether or not they consider that the use of military force in Gaza recently has or has not been in violation of criterion 2 (c)?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

Absolutely; I agree with the right hon. Gentleman that decisions on licensing must take account of current and recent events, and that is exactly what they do. The licensing criteria and policy itself have not changed, and do not need to change. None the less, it should be looked at in the light of current events. Any future licensing applications for exports of goods and components to Israel will have to bear in mind the recent events that have tragically taken place in that country.

At the risk of being controversial, I should like to respond to the point made by my hon. Friend the Member for Kingswood about the moral equivalence of an arms embargo on both Hamas and Israel. One is a terrorist organisation and the other is a democracy. It is right that we should apply different criteria to terrorist organisations and democratic countries. That is not to say that we do not have concerns about the use of military goods exports. Clearly, we do, and we take it into account as part of the licensing criteria. I do not accept the rationale of my hon. Friend's argument, but if he wants to explain it again to me, I will happily give way to him.

Photo of Roger Berry Roger Berry Labour, Kingswood

There are occasions when democracies are in conflict, and arms embargoes are applied. The Government's position is that Israel is in unlawful occupation of the Palestine territories. Moreover, there are countless views of the Government on the wall and so on.

If the Government called, as they did, for an immediate ceasefire in Gaza, and if they called, as they rightly did, for efforts to stop arms going into Gaza that could have ended up in the hands of Hamas, why on earth did they not, at the same time, call for an arms embargo on Israel, which has weaponry that far exceeds anything that Hamas could ever dream of? Why use such double standards? This is a conflict that the Government say should cease, being fought in a territory that the Government say is illegally occupied by the state of Israel.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Order. I am allowing rather lengthy interventions because we are not pressed for time. However, I ask hon. Members to make their interventions succinct and brief.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

I do not accept that the Government have double standards. We are correctly applying both international law and the licensing criteria under the regime that we are discussing at the moment.

Let me turn now to compliance with open licences, which was raised by the hon. Member for Cotswold. I should like to reassure both him and others that the Government take such a matter extremely seriously, as they do any breaches of the controls or the licence conditions. We have regular audit checks to ensure that companies are complying with the terms of their open licences. In 2008, the Export Control Organisation undertook 15 per cent. more audits than in 2007 following an increase in resources in the compliance unit. In 2009, the number will increase still further as the new officers are now fully trained and handling their own portfolio of companies.

I know that the Committees have expressed concerns before, and to address those the ECO has put in place additional measures to increase compliance levels of open general licence users. From June 2008 to the end of February 2009, 38 warning letters were issued to companies that had failed fully to meet the terms and conditions of the open licences. Until recently, all the companies had been found to be compliant at a revisit. However, earlier this month, the ECO suspended for a period of three months a company's use of open licences following repeated non-compliance with the terms of the licences that it used. That indicates the robust approach that the Government are taking.

Hon. Members also raised the issue of transport controls on category B goods. Such goods are of heightened concern, but they are also traded legitimately. Therefore, the arranging of transport will always be controlled, but the provision of transport will be controlled in specific circumstances. Only a much-reduced range of supporting services will be controlled, which was of particular concern to the hon. Member for Cotswold.

Finally, let me respond to the point, on which many hon. Members have pressed, about how we can spread best practice and improve standards internationally. Hon. Members have been very appreciative of the fact that we have good and strong standards in the UK. They rightly asked us whether there is more that we can do in this area, but there is a recognition from the Committees that standards in the UK are higher than in many other countries.

The Department for Business, Enterprise and Regulatory Reform supports the FCO in international outreach work, and undertakes international outreach activities as part of a joined-up government effort to promote good export licensing practice in other countries, including those that have recently joined the European Union. We also host inward visits to cover specific aspects of export controls.

In 2008, officials were involved in 12 inward visits and participated in 11 outreach activities overseas. ECO officials were also invited to deliver presentations at a number of overseas international conferences and seminars. I could give many examples, but I want to close by illustrating the importance that the Government attach to the export licensing regime in the United Kingdom. We want high standards not just for the UK, but for the EU through the consolidated criteria that are followed by all member states, and we will continue to promote the highest standards internationally.

Question put and agreed to.

Sitting adjourned.