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Column 55do that would undoubtedly be for the Select Committee to look into the issue. As Chairman of the Select Committee on Defence, I can endorse all that the President said about the impartiality of Committees. I assure him that Conservative and Opposition Members rigorously scrutinise what Ministers tell them.
I should like to put the debate into its wider context. In one year, 1993, we exported £7 billion-worth of arms. I totally disagree with my hon. Friend the Member for Buckingham (Mr. Walden) who, unfortunately, is not in the Chamber. More than 500,000 people are involved in arms production. Our armed services need to be able to use British equipment where possible. We need the best equipment, and we can afford to produce it only if we succeed in exporting arms because that supports the logistics and the necessary research and development. The idea that we should cut our arms supplies is absurd, and would cause deep and lasting damage to our country.
We should compare the £7 billion-worth of arms exports in 1993 with exports to Iran and Iraq in the 1980s. During that entire period, exports to Iran totalled £35 million, while those to Iraq amounted to some £569 million. That was over 10 years, and when it is contrasted with the exports in 1993 one sees the relative insignificance in terms of money and equipment that the House is debating.
In 1987, there were some 98,000 applications to obtain the necessary licences under the then rules, and only a handful succeeded. It is not surprising that the Department of Trade and Industry was inundated with such work and that its officials occasionally allowed something to slip through.
Project LISI is the title of the BMARC export that we are debating. No one has yet mentioned that when the contract for that was signed the project was being handled by, and BMARC belonged to, Oerlikon, which is a Swiss company. It was not until nearly two years after that contract was entered into that the new management of Astra, headed by Mr. James, bought BMARC and continued with that contract. As I understand it, in 1988 the intelligence community realised that Oerlikon--not a British company--was exporting arms via Singapore to Iran but it did not specifically mention BMARC. It is again, therefore, not surprising that, in this very complicated net of applications and other matters which were being examined by the intelligence community, the DTI and the MOD, a comparatively small contract might have slipped through.
I should like to move on from that as I appreciate that I have only a minute or two to deal with two specific issues that have been raised this afternoon. The first relates to my right hon. Friend the Chief Secretary to the Treasury. He has come under attack on three bases.
First, The Independent newspaper, which normally I think is reliable and accurate, has today published one of the most appalling and inaccurate headlines that I have read in the media, saying that papers showed that "Aitken knew" about the arms deal. Nothing in the text of that article or what anybody has said--there is no evidence from any source whatsoever-- suggests that that is an accurate statement. My right hon. Friend has categorically denied it. For a national newspaper to use such a headline is irresponsible, and journalism of the worst kind.
Column 56The second attack on my right hon. Friend, which was made by the Opposition Front Bench, can be summed up in the words, "If he did not know, he certainly should have known." I am sorry that the right hon. Member for Copeland (Dr. Cunningham) is not here, but I have no doubt that he will read the report. If he were here, I would ask him to tread very carefully when lecturing the House about the duties of non-executive directors. I happen to know that the right hon. Gentleman is a non-executive director of two chemical companies. I know nothing against the activities of those chemical companies, but I will wager that some of the contracts undertaken by those companies have been made without the express knowledge of any of the non-executive directors.
Sir Nicholas Bonsor: I have been corrected. He is an adviser, not a non-executive director. None the less, I am sure that, if the right hon. Gentleman is doing his job in advising those companies, he should know what is going on in them. It is precisely that sort of relationship that Lord Nolan, in my view perfectly properly, attacks.
Nothing said in this debate or in the press justifies the sort of behaviour which has been shown from those quarters towards my right hon. Friend. I hope that the House will accept the word that he has given that he did not know what happened and allow him to get back to the excellent job that he is doing as Chief Secretary to the Treasury.
In the few minutes that I have left--
Sir Nicholas Bonsor: In the two minutes that I am told I have left, I shall move on to the issue of Mr. Gerald James. Unlike most hon. Members, I have met Mr. James. He provided a lot of papers to me about the Iraqi gun affair when I was appointed Chairman of the Select Committee on Defence, and asked me to instigate the inquiry into it. I told the House that I was deeply disturbed by some of the things that I saw. I did not feel that the Defence Committee had the proper resources to look into that matter. After discussion with the other members, I passed all those papers on to Sir Richard Scott. I believe that Mr. James has been treated very badly. His misfortune was that his very successful company, Astra, made two unfortunate purchases--BMARC and the other company that supplied the Iraqi gun, PRB. Those purchases led him to disasters with which he was not equipped to deal. He was treated badly by certain members of the Administration, with or without the Government's knowledge. That is something Sir Richard Scott is going to look at, not something for the House to comment on today.
I hope that we will follow the advice of my right hon. Friend the President of the Board of Trade to refer the matter to the Select Committee on Trade and Industry, and that the Committee will look into the matter.
Column 57"it does appear that there may be grounds for believing that the final destination of naval cannon made by BMARC could well have been Iran."--[ Official Report , 13 June 1995; Vol. 261, c. 596.] That must be one of the biggest confessions ever made in the Chamber that was not followed by a resignation, the establishment of a full independent inquiry or even the slightest acknowledgment of ministerial responsibility.
The arms embargo during the Iran-Iraq war was there for a purpose. I was working in Baghdad at that time on legitimate civilian business, with the full backing of the DTI. Now we are told that, during that time, the DTI was approving the export of arms to fuel the already devastating war in that region. Examples like that, combined with allegations of British troops facing British weapons in the Gulf war shortly afterwards, contribute to the accusations of disgraceful hypocrisy and illegality in British foreign policy. If the Government believe those allegations to be false, an independent inquiry is surely the best way to prove it.
The question of illegal arms sales from Britain to Iran in the mid to late 1980s has, so far, been too narrow in its focus. Of course, the Chief Secretary to the Treasury has still to convince anyone of his innocence in this affair, but to concentrate purely on his role as a non-executive director is to miss the point. The real investigation goes far beyond that. The roles of the DTI, the Ministry of Defence, the Foreign Office and the intelligence services must all be probed in the fullest possible detail if the truth is to be discovered.
A vast array of evidence suggesting serious wrongdoing has been put together, mainly by the media, whom I congratulate on their digging. The denials of the accused have varied from the unsatisfactory to panic. The result is a general air of suspicion that will not go away simply because one Minister cannot remember and another was not even there at the time. If we are to avoid the sort of trial by media that the Chief Secretary so abhors, the plethora of unanswered questions that surrounds the affair must be answered in the appropriate forum. What are the unanswered questions? Why has it taken the Government so long to put two and two together, considering that the vital clues that prompted the President of the Board of Trade's suspicions were both available in the 1980s? Why have we had to wait seven, eight or nine years for the issue to be addressed? Should not the DTI, with advice from the Ministry of Defence and the Foreign Office as well as the intelligence services and Customs and Excise, have been able to smell a rat at the time? Did the Government really think that the amount of munitions--140 naval guns exported in project LISI--could all be wanted or needed by the navy of Singapore? I represent GCHQ and it is inconceivable that the high standard of intelligence gathering in this country could have missed something as important as the breaching of an arms embargo to Iran.
To what degree should Ministers accept responsibility for the failings of the export control procedures and the breach of the arms embargo? Given reports that Mr. Stephan Kock, one of the co-directors, gave representatives of MI6--with which he had close contacts--a tour of BMARC's factory showing part of the project LISI exports, what exactly was the role of the intelligence services and why did Ministers apparently ignore the advice that they were given? Were the errors made in granting export licences the result of a conspiracy or a cock-up? If those and countless other questions are
Column 58to be answered, an inquiry with the necessary resources and the right of access to all relevant information must be established. If the role of the Chief Secretary is to be ascertained, it is only right that he be given the opportunity to give evidence to such an inquiry. There appears to be some uncertainty and possible contradiction in his account of events in BMARC between 1986 and 1988.
For example, how is it that, according to the minutes of BMARC's board meeting on 2 November 1988, it appears that the Chief Secretary made a contribution to discussions at a point after he claimed to have left the meeting? How is it that he failed to read the company's progress report circulated to the board meeting on 28 February, a meeting that he personally attended? This sits very oddly with the Chief Secretary's claim that he took all steps to become well briefed on the company's activities. The Chief Secretary chose to be a director of the company. He shares the corporate responsibilities of all directors and, as a director, he must be presumed to know of the very important contract in question.
It may be that the Chief Secretary is right and his boardroom colleagues are mistaken, but, until the investigation is taken away from the media and given to an official inquiry, the Chief Secretary cannot hope to use his simple sword of truth or his shield of fair play. In the light of this weekend's developments, the onus is still very much on the Chief Secretary to prove that he was unaware of what BMARC was up to. There have been contradictory statements. Establishing the appropriate means of investigation is something that the Government have so far done everything possible to avoid. In view of the complexity and importance of the countless questions that must be answered, why did the President of the Board of Trade suggest that the Select Committee on Trade and Industry would be able to reach satisfactory conclusions with its limited resources if his own Department, with all its personnel and access to information, had failed to do so?
The suggestion that the Select Committee should investigate the affairs of BMARC is as unrealistic as the Chief Secretary's request that Lord Justice Scott should look into the allegations levelled against him. The Select Committee and Lord Justice Scott have expressed the view that they are not equipped satisfactorily to investigate the affair. To expect them to take on the job, therefore, will be regarded as a whitewash and a sham.
The questions that I have asked deserve investigation and answers. It is not good enough for Ministers to say, "Sorry, I can't remember anything," or "It wasn't me. I wasn't even there at the time." That is all we have been offered so far, but it does not wash. If that evidence was submitted to a court of law, I cannot help but feel that it would be dismissed on the grounds that the witnesses were unreliable.
The idea that Ministers will not take responsibility for the failings of their own Departments is unacceptable to the British people and to the House. We now need a full, independent, judicial inquiry to look into the matter properly. I trust that the Government will not shy away from their responsibility to establish such an inquiry.
Column 59includes the former BMARC factory at Faldingworth in Lincolnshire. The site is still operational under the new ownership of Royal Ordnance. It assembles shells and fills them with explosives, as it did under BMARC's ownership.
My purpose in speaking today is to establish the fact that, in my view, none of my constituents or anyone involved in BMARC can be accused of wrongdoing. Certainly, there was no question of anyone knowing at the factory that the end user was Iran--shipping freight was simply marked with a code. However, nor do I believe that anyone higher up in BMARC management knew--certainly, a non-executive director could not have known.
The contract for project LISI--the sale of 20 mm guns to Chartered Industries of Singapore--was very clear. BMARC sold the guns to Oerlikon, and not to Singapore, as it was required to do under their licence. Oerlikon shipped the goods to Singapore. Oerlikon in Switzerland, or possibly someone working in Chartered Industries in Singapore, passed them on to Iran without the knowledge of BMARC's staff or management. BMARC was prohibited from trading not only with Iran but with Singapore under the terms of its licence with Oerlikon.
Mr. Jim Cousins (Newcastle upon Tyne, Central) rose --
Mr. Leigh: No, I shall not give way as I have only 10 minutes. I have documentary proof. I have obtained from within the factory copies of the licence put together for the receiver of the company on 28 February 1992. They are, as far as I know, hitherto
unpublished--perhaps they are some of the missing documents, but I do not know. They are marked "Private and Confidential". Exhibit 1B states:
"The following manufacturing and selling rights are granted by Oerlikon to BMARC under the terms and conditions of the Licence Agreement for the below listed material:--
--Exclusive manufacturing rights in the UK.
--Exclusive sales' rights to the Government of, as well as other end-users in, the UK.
--Exclusive sales' rights for worldwide naval applications, except for the countries listed in Exhibit 2".
Exhibit 2 states:
"In the following countries Oerlikon will be the sole distributor for all the Material listed in Exhibit 1B. Therefore BMARC is not entitled to sell any of the Material either directly or indirectly in the below listed countries. :
--all Latin American countries".
The licence is quite clear, but I have today double-checked at some length with Dr. John Pike, the former armaments director in the relevant period and the former managing director of BMARC, as well as with trade union representatives of the work force in my constituency.
Column 60As far as anyone in the company was concerned, Singapore was the end user of the goods. That was a perfectly legitimate assumption, given that BMARC did not have any direct contract with Singapore. The Singapore navy already possessed these guns and was expanding. Chartered Industries of Singapore to which the guns were sent by Oerlikon--not by BMARC--was Government-owned and was a proper and legitimate, and likely, recipient of them. However, because the guns were not being sold directly to the Singapore navy, Major-General Donald Isles, a highly respected, responsible and competent former Ministry of Defence employee, and the other full-time directors checked carefully.
There was no reason for them to indulge in shady deals. Why should they risk acquiring a possible criminal record for a deal? In addition, BMARC was a highly respected and successful British company and did not need to break DTI guidelines. Having checked carefully with the DTI, whose officials apparently had the full information at their fingertips, there was no doubt in the minds of the directors that the end user was Singapore, not Iran.
My point is that, if the DTI, with all its specialised resources, did not manage to second-guess the deal, how could a non-executive director such as my right hon. Friend the Chief Secretary? What about Gerald James? He may indeed have a legitimate grievance--he brought down Astra and BMARC through his misjudgment in buying PRB, and was no doubt sold a con by the Belgian Government--but, as a result of that grievance, he is undoubtedly pursuing a campaign--some might say, a vendetta--against the British Government. Because my right hon. Friend happens to be a member of the Government, he is the target of that campaign.
When Mr. James was asked by Mr. Peter Snow on the BBC's "Newsnight":
"Did you . . . at any time brief him"--
my right hon. Friend--
"personally about the nature of the Singapore contract?", he said:
"No I did not brief him personally at all."
I have, from my own sources within the company, obtained more information. After he took over the company, Mr. James apparently took the opportunity when the remaining Swiss employees were out of the company offices for their national holiday to check their papers. He could find no evidence that the guns were going anywhere other than Singapore. I submit that, at the relevant time, no one in BMARC--certainly not the staff or my constituents, or the non-executive directors--had any clue that the goods were going anywhere but Iran-- [Interruption.] --Singapore. I apologise, that was a slip of the tongue. They were clear that the goods could have gone only to Singapore, not Iran.
In any event, my right hon. Friend joined the company only in 1988 when the contract was already well advanced. It was signed in 1986 and, by 1990, my right hon. Friend had resigned. According to Dr. Pike, to whom I spoke today, it would have been dealt with only in the most cursory fashion, if at all, at any board meetings that my right hon. Friend attended--for example, to check that the goods had been delivered to Oerlikon.
Column 61There may or may not have been some incompetence on the part of DTI officials--we shall no doubt find out about this--in not making the connection between the Singapore deal and the known fact that Oerlikon was selling to Iran. However, if full-time experienced DTI and intelligence service officials could not make such a connection, I cannot see how my right hon. Friend could have done so. In any event, he has given his word to the House. He is a much-admired and competent Minister. We should accept it, but the evidence that I have found and that others have alluded to is overwhelming. It shows that he did not know and could not have known. On the contrary, we should back my right hon. Friend and what was an excellent British company, run by extremely responsible and respectable people such as Major-General Donald Isles.
My right hon. Friend is a victim of a discreditable witch hunt by the Opposition and media. He should and must stand his ground, so that truth and honour will be the touchstone by which we conduct our affairs, and not personal vindictiveness and innuendo.
Mr. Allan Rogers (Rhondda): I must admit that I have not heard in this House a more flimsy defence of any situation than the one that we have just heard from the hon. Member for Gainsborough and Horncastle (Mr. Leigh). He accuses us of pursuing a vendetta, but may I put just one point to him? The statement to the House of the Secretary of State for Trade and Industry has brought about today's debate; it was not the Opposition chasing the issue. For what reason did the President of the Board of Trade want to bring it back to the House?
I say this not with any particular hindsight, but because I might have been the first person in the House to raise this issue. I did so back in 1989 when I was shadowing, as I had been for a number of years, the defence procurement portfolio when it was held by the right hon. Member for Hove (Sir T. Sainsbury) and, later, Alan Clark. At that time, it was fairly obvious that something was wrong. If I had time, it would be easy to catalogue the responses I had, but I want to pick up one issue in the limited time available: the lost documents that seem to have become available this weekend. I find today's response by President of the Board of Trade as remarkable as the fact that those documents are suddenly available, that he suddenly finds a reason for bringing this matter forward, and that he suddenly finds the questions of my right hon. Friend the Member for Copeland (Dr. Cunningham) so stimulating that he finds that there is a gap in the intelligence.
Let me just remind the House that an investigation into Astra/BMARC had been going on for three years. The response to a question that I tabled last year revealed that the cost of that investigation was £2, 170,000 --more than £2 million had been spent on acquiring the information, and suddenly we are told that it was not available until last week.
In response to a question that I tabled on 19 April last year, the hon. Member for Tatton (Mr. Hamilton) said:
"The inspectors commenced work on appointment on 16 August 1990 and their report was signed on 7 April 1993"
So all the information that is presently available was available all the time that these obfuscations were going on. The then Minister went on to say:
Column 62"the inspectors considered substantial representations received during the course of fairness procedures."--[ Official Report ,20 April 1993; Vol. 223, c. 74. ]
Mr. John Anderson has again been heavily featured in the media this weekend. In relation to the lost papers, when he was Minister of State for Defence Procurement, the right hon. Member for Thanet, South told me:
"Mr. Anderson was arrested by the Ministry of Defence police . . . in April 1990. He was detained in connection with a possible case of corruption, interviewed and released without charge. Subsequently, he made a number of complaints concerning the circumstances of his arrest. These have been investigated in accordance with the Police and Criminal Evidence Act 1984 and the report currently rests with the Police Complaints Authority whose decision is awaited."--[ Official Report , 26 April 1993; Vol. 223, c. 298. ]
Those papers relate to BMARC and Astra, the company run by Mr. John Anderson, who was a director at the same time as the right hon. Member for Thanet, South. I find it incredible, therefore, that the information is seemingly suddenly available, as it was supplied to me more than a year ago, and after nearly £2 million had been spent on that report.
The issue of arms exports to the middle east and elsewhere has come about because of a change of culture in our political life during the 1980s. An hon. Member asked for an investigation into arms exports. He probably was not aware, although it was pointed out to him later, that the Select Committee on Trade and Industry had considered the issue--specifically in relation to Iraq, I warrant that, but also in relation to other issues, such as the uses and applications of licences.
If we put it into context, in 1984 in this country there was a tremendous charge for arms exports. I am not questioning the morality or otherwise of arms exports, but that charge for more and more exports generally existed throughout the Department of Trade and Industry, the Ministry of Defence, the Defence Export Sales Organisation, International Military Supplies, and even with the Prime Minister at the time. She accompanied her son, who took a rather lucrative part in these events, and batted for Britain--I cannot think of a better bat--in both Saudi Arabia and Malaysia to get these huge contracts.
A general culture, going through Whitehall and the relevant Departments, allowed such instances to happen. All it requires is a greedy man or men to latch on to that culture or the lack of morality in relation to where arms were going.
We should not forget that the guidelines controlling the export of arms were laid down by this Government--by Sir Geoffrey Howe--in 1984. One of the cardinal criteria was that arms should not go into regions with bad human rights records, and that they should not lead to warfare between countries. On many occasions, the then Secretary of State for Trade and Industry, the right hon. Member for St. Albans (Mr. Lilley), said that arms should not go into regions where they could be used in a way that cut across the Government's guidelines. The whole issue revolves around that change in culture. It is about arms going not only via Singapore into Iran but into many other areas. The then Foreign Secretary, Sir Geoffrey Howe, said: "We should maintain our consistent refusal to supply lethal equipment to either side"
in the Iraq-Iran war that was going on at that time. That was flagrantly broken by members of his own Government. He also said:
Column 63"We should not, in future, approve orders for any defence equipment which, in our view, would significantly enhance the capability of either side to prolong or exacerbate the conflict".--[ Official Report , 29 Oct 1985; Vol. 84, c. 450. ]
That guideline was again broken by the Government.
On reflection, probably the only honest man in the whole affair was the then Minister for Defence Procurement, Alan Clark, who has left this House. At least he always made it clear what he was about, and made no apologies for the fact that he knew that arms embargoes were being broken. He said that that was because it was bringing jobs to this country.
I am amazed that the Chairman of the Select Committee should support that view this afternoon. If there are jobs out of people being killed or murdered in other parts of the world, we should not have such jobs in this country. If there is to be an inquiry into arms exports, the first thing we should consider is the morality of it.
People are trying to suggest to us that there are only two options; either it was a cock-up or it was a conspiracy. I believe that it was both. The general climate in the Government Departments I have named, and the inefficiency and incompetence of the Department of Trade and Industry, allowed those who were conspiring to break the arms embargo to carry out that dirty, sordid business, as I pointed out to the then Prime Minister, Baroness Thatcher, in 1989 and to the present Prime Minister in 1992--
Sir David Mitchell (Hampshire, North-West): The motion refers to the BMARC affair, which is concerned with arms for Iran. The reality is that the motion is a malicious attempt by the Opposition to destroy the reputation and career of my right hon. Friend the Chief Secretary to the Treasury.
There are certain facts that should be brought to the attention of the country and the House. In 1986, BMARC was a Swiss-owned company, and it was at that time that it signed the offending Singapore contract. In 1988, the company was bought by Astra, a British company. In the same year, my right hon. Friend the Chief Secretary was made a non-executive director, a post in which he remained for only 19 months. In practice, non-executive directors are not much more than advisers to the board; they have no powers to interfere in the management of a business.
I now turn to Mr. Gerald James, the chairman and the source of the suggestions that my right hon. Friend knew about the contract. I draw the House's attention to an article on page 25 of The Economist this week, which says:
"Mr. James says that a group of senior figures at BMARC knew all about these fishy contracts yet thwarted his efforts to find out what was going on."
If the chairman did not know what was going on and if the chairman was thwarted in his efforts to find out, how on earth could a temporary, non- executive director be expected to find out and to know?
My right hon. Friend the Chief Secretary has no case to answer. The House should accept the Government's amendment as a cost-effective and speedy way in which to clear the matter up.
Column 646.11 pm
Mr. Jim Cousins (Newcastle upon Tyne, Central): The matters before us are serious, but we should not jump to conclusions. What is highly significant is that the Chief Secretary to the Treasury--I do not think that we should dwell on him--shared with the nation on "Question Time" last Thursday the information that he had been briefed that some of the contracts involved were for the Singapore navy. That contradicts the argument put forward by the hon. Member for Gainsborough and Horncastle (Mr. Leigh) that none of the contracts was the responsibility of BMARC itself. If BMARC was simply producing the items and could not sell them, why was it applying for export licences for the relevant items?
The entire matter was exhaustively dealt with in the Department of Trade and Industry report on the Astra group of companies. The report makes it crystal clear that the licence agreement that Oerlikon had with BMARC, which Astra inherited when it took over, did not mean that BMARC--and Astra subsequently--was not the promoter of the sales, albeit that the goods were being produced under a licence agreement with Oerlikon. Those are important matters, which we must seek to get to the bottom of.
The Select Committee on Trade and Industry will face a number of considerable difficulties. First, there is the quantity of information. Some 1 million documents are said to have been removed from the Astra group of companies, either by DTI inspectors, from 1990 onwards, or by Ministry of Defence police. That is a formidable and overwhelming task of investigation. It took the DTI almost three years to produce its report on the Astra group of companies--never mind the efforts of a Select Committee, which will face other lines of inquiry.
The Select Committee will immediately confront the difficulty of intelligence information. It has had an offer from the Chairman of the new Intelligence and Security Committee, but the difficulty is that he was the Secretary of State for Defence at precisely the time when the Ministry of Defence police were going into the Astra group of companies to lift the information. That is a difficulty--a contradiction.
The Select Committee will face the puzzle of understanding why, if the Government did not know about arms sales to Iran, a wholly owned Government company, International Military Services Ltd., had an office in Iran that was open throughout the entire period of the first Gulf war between Iran and Iraq. Those are difficult matters to inquire into.
Another problem, sadly, is the unfortunate coincidence that the company that dealt with the receivership of Astra--Coopers and Lybrand--had a historic connection with Sir Kenneth Cork, who, unfortunately, is no longer with us; I am conscious of what I am saying in this regard. Sir Kenneth had a business connection with the Chief Secretary through his company Aitken Hume International. Another difficulty is that all the investigations into Astra have been carried out, to some degree, by the Department of Trade and Industry through its inspectors, who took three years to report. Only a year after it had had that report did the Department of Trade and Industry decide to prosecute all but one of the directors of Astra. That legal case is still before the courts. I have a question for the Government. Can they give an assurance that, if a