Hansard 30 January 2007 Sale of Radar System (Tanzania) [30 Jan 2007] 30 Jan 2007 : Column 182 When my hon. Friend the Minister winds up, I hope that he can tell us about the progress that has been made on criterion 8 with our European partners, or on an international arms trade treaty. I hope that he can also tell us which countries will pose the greatest challenge in trying to agree and enshrine such a treaty. 8.58 pm Clare Short (Birmingham, Ladywood) (Ind Lab): I am pleased that the squalid British Aerospace sale of a military air traffic control system to Tanzania has reached the Floor of the House. All the parties involved in the deal should be deeply ashamed, but it is not an issue for party-political point scoring. It is good that the debate has not proceeded on that level. The truth is that successive Governments of both parties go out of their way to promote British arms sales in a way that is unprincipled, is of no economic benefit to the UK, distorts our foreign policy and undermines our reputation. The case of the Tanzanian air traffic control system is a particularly sordid example of the UK's approach to arms sales. I am well aware-indeed, hopeful-that the investigation of the case by the Serious Fraud Office might result in criminal charges. That will be decided elsewhere. What is important here is for UK politicians to learn the lessons of the reality of UK arms sales policy and make real changes so that similar deals are not supported in future. To that end, I want to put on the record what I know of British Aerospace's contract to provide an overpriced, outdated and unnecessarily military radar system to Tanzania, and of the powerful support given to the deal by the Secretaries of State for Defence and for Trade and Industry, and by the Foreign Secretary and the Prime Minister. Let us be clear: although the individuals holding those offices must take responsibility for the approach that they adopted, they were reflecting deeply held views and values in their respective Departments. The problem is systemic in nature, and that is what the House of Commons has to address. When the project was being discussed in Whitehall, I argued that it was clear that the deal was so useless and hostile to Tanzania's interests that it must have been made corruptly. I had no evidence at that time, but evidence has since emerged that large payments were made to secure the deal. That is especially shameful when what was being sold-to one of the poorest countries in the world-was a useless piece of military technology priced far above its real value. We must therefore ask the following question: if British Aerospace and senior UK politicians were willing to go to the lengths that they did to secure the Tanzania deal, how much further would they go when promoting arms sales worth billions of pounds? I became aware of the contract when the World Bank representative in east Africa objected to the proposed sale. Some officials who had served in the Department for International Development for many years were surprised that the project had come forward for a second time. I understand that there had been a proposal some years earlier for a military air traffic control system to cover the whole country, but it had been blocked because Tanzania simply could not afford it. Now it seemed that the same project was being split in two and put forward again as a two-stage project. 30 Jan 2007 : Column 183 The World Bank representative in east Africa was very concerned about the contract, as Tanzania was being considered for enhanced debt relief under the heavily indebted poor countries initiative. As a condition of debt relief, HIPC rightly imposes controls on future borrowing that require that it must be confined to concessionary lending- that is, aid lending not at market rates from organisations such as the World Bank, the African Development Bank and so on. It also imposes a ceiling even on concessionary lending. In this case, as has been noted, the loan was provided by Barclays bank which, as a commercial bank, was clearly incapable of providing a concessionary loan. Barclays colluded in this sordid project by inflating the size of the loan, it seems, and then pretending that it was concessionary in order to evade conditions set by the World Bank and the IMF. The smell given off by the project spread a long way, and Barclays has not been held to account, although the hon. Member for North Norfolk (Norman Lamb), as his party's spokesman on international development at the time, tried to do something in that respect. As has been said, the World Bank representative in east Africa then decided to commission a report from the International Civil Aviation Organisation on the value of the deal to Tanzania. At the time it was argued by the DTI-and some people have repeated as much tonight-that Tanzania would earn money from the air traffic control fees and that the deal would therefore finance itself. As has been noted, the ICAO made it clear that the technology was old fashioned and expensive, that it would cover only half the country at best, and that it would not provide Tanzania with the air traffic control that it needed to develop its tourist industry. That development was very much in the country's economic interest. By contrast, as I have said, the European Investment Bank was offering a loan at a fraction of the projected cost. From memory, I believe that it put the cost of providing air traffic control to three or four east African countries at about £12 million. The technology had progressed to the point that a much cheaper and more effective civil system was available, and an EIB loan to purchase it was on offer. There is no doubt that Tanzania needed a new civilian air traffic control system to enhance its earnings from tourism. The British Aerospace system was an overpriced and old-fashioned military system that did not meet that need, as the ICAO made clear. Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): The right hon. Lady is making a powerful analysis of what happened. She said that the DTI had come up with the idea that the project might be commercially beneficial to Tanzania. Did it undertake an empirical exercise and provide relevant figures, or did it merely assume that it was possible that some benefit might arise, and offer no figures in support of that assumption? Clare Short: I am trying to make it clear to the House that we need to address a deep culture in our Government system. The DTI sees it as its duty to push 30 Jan 2007 : Column 184 all arms sales deals and will always find arguments for them. That is how it is and any incoming Government will face the same culture. We need to change it. When the events I was describing were taking place, the Department and I planned to offer Tanzania increased aid to help to fund a big new effort to provide free primary education for all children-it was great to hear the Secretary of State report an achievement figure of 96 per cent. It seemed wrong that our increased aid would finance that objectionable project. The hon. Member for City of York (Hugh Bayley) said that it would not. Of course it would. If we give money to a country that is buying a rotten project for which it has to pay in foreign currency, our increased aid is, in effect, funding the rotten project. We cannot turn away from that; we are implicated whatever we do. I made the decision to cut back our promised aid by £10 million and went to see President Mkapa-a man I greatly respect and who did a good job by his country. He told me that the contract had been signed before he came to office, a deposit had been paid and there was a penalty clause if Tanzania did not go ahead. I concluded that the best way forward for all concerned was for the UK to refuse a licence under criterion 8. As has been said, Robin Cook had raised the threshold for deals made by all EU countries to include consideration of whether an arms sale would affect sustainable development-a provision that had never been made previously. There is no question but that the project affected Tanzania's development and that it should have been refused under criterion 8. If anyone argues that it should not have been refused under that criterion, we have to change the wording to tighten up the criterion so that we adhere to the standard. Susan Kramer: Is the right hon. Lady saying that after the presidential election the Tanzanian Government were interested in finding a way out of the contract? If so, that differs from statements we have heard that a sovereign Government wanted to make the purchase. Clare Short: The hon. Lady makes an important point. President Mkapa was a technocrat and a fine President, but he was not politically powerful and he inherited the contract. If the UK had done the right thing by refusing a licence under criterion 8, he would have been a very happy man, but there were penalty clauses for breach of contract and a payment of about £5 million had already been made. The important point is that it was a UK decision. At that stage, I spoke personally to the Prime Minister, the Chancellor and the Foreign Secretary-then Robin Cook. The Chancellor and the Foreign Secretary agreed that we should stand firmly against the deal, but the Prime Minister just listened and gave no undertaking. The 2001 election then intervened and Robin Cook was replaced by a new Foreign Secretary who was strongly briefed by his Department and strongly supported the deal-the Foreign Office is at it, too; it absolutely believes that its duty to the UK is to promote arms sales. The argument going on in Whitehall got into the public domain, and the Deputy Prime Minister convened an ad hoc Cabinet Committee to try to resolve the problem. The clear message from No. 10 was that the 30 Jan 2007 : Column 185 deal must go ahead, come what may, and all Secretaries of State were pressurised in that direction. We-that is I and officials at DFID, which is a great Department with lovely people-were still determined to fight, but only then did we discover that there was a secret pre-deal approval system. The Ministry of Defence had given approval for the project, which was already under construction in the Isle of Wight, on the basis that it would not be contested because it was uncontroversial. The thing was being built, people were working on it and by that stage, although we tried, no one could be persuaded not to issue a licence. It is easy to say that we should cut off aid if there is corruption, but there are many poor and hungry people in Tanzania. The aid is for them. Someone else stole the money, but if we punish the poor for that we are punishing the wrong people. What should we do? That is the dilemma and that is why we need to tighten up our systems. President Mkapa and I reached the agreement that if he promised that there would be no second half to the project, we would go ahead with increasing our aid. I saw him after he had ceased to be President, and he told me that he had kept the promise, so although that makes the system even more useless-because it covers only part of the country-at least no more money was wasted. My conclusion is that we need to ensure that such a project will never again be made. If we all agree that it is disgusting-and I think that it is great to see the Tory party engaging in this debate-we have a chance to try to clean up our system. Current UK policy is based on the assumption that all arms sales are good for the UK economy. Read Samuel Brittan repeatedly in the Financial Times and discover that that is not the case. No other sector is subsidised with so much political muscle pushing up the exports, come what may. If the sector cannot be profitable in its own right, the highquality engineers who work in it should be redeployed in other sectors. Secondly, there seems to be a belief that somehow we have to have an indigenous arms industry as though Napoleon might invade and we need to be able to make our own rifles. It is a completely time-lagged notion of the need to prop up and support arms exports. One of its effects is that our military gets lousy radios, lousy rifles and so forth that would have been better supplied if we purchased some of the equipment on the international markets. I repeat how pleased I am that the Tory party has raised this issue, but let us go beyond the usual point scoring. We have really uncovered something dirty here. The sale should never have been approved. All those senior officers in our Government should not be promoting dirty arms deals like this. If criterion 8 allows it through, let us tighten it up. Let us agree it cross party. Let us clean ourselves up and look again at the way in which we organise arms sales for our country. We could improve our reputation enormously and improve our relationship with all sorts of countries, including some of the poorest countries in the world. 9.11 pm Daniel Kawczynski (Shrewsbury and Atcham) (Con): My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) made a very good speech and I 30 Jan 2007 : Column 186 concur with his comments about the right hon. Member for Birmingham, Ladywood (Clare Short), who has acted very honourably throughout this entire process. I want to congratulate her-on the record-on that.