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Dr. Cable: As my colleagues behind me have just said, I wish that we were in conspiracy with The Guardian. I always tend to regard it as a rather pro-Government newspaper. None the less, that is not the central point.

I want to clarify the fact that we have no objection to British companies selling arms to a friendly country provided that it is done legally, is not subsidised, is on a commercial basis, and satisfies the export control regime’s proper tests. If the awaited contracts satisfy those tests, we will have no quarrel with them.

David Taylor (North-West Leicestershire) (Lab/Co-op): The hon. Gentleman refers to the Export Control Organisation by implication. Does he agree that for the Defence Export Services Organisation to exist in parallel with it sends entirely the wrong message about arms exports, and that we should tighten up the system to ensure that arms are not sent to unstable regimes, war zones or countries that routinely abuse human rights? Why does he not refer to that in the broader context of his comments?

Dr. Cable: I shall refer to DESO. Certainly, the export control regime needs to be tightened up, as I said from the Front Bench when the matter went through Parliament, but it is as it is. I think the hon. Gentleman’s specific point relates to DESO, and the Chief Secretary to the Treasury made the interesting observation a few days ago that it is an anachronistic body that should be closed. I shall be interested to hear during the debate how the Government respond to that.

Mr. Nigel Evans (Ribble Valley) (Con): Does the hon. Gentleman understand the sort of damage that he is doing to the industry? I have a BAE Systems plant at Samlesbury in my constituency which employs thousands of people in highly paid and skilled jobs. The only people who will get any joy from the Liberal Democrats’ motion today are our competitors.

Dr. Cable: I have already given the answer to that question to the hon. Member for Aldershot (Mr. Howarth). The hon. Member for Ribble Valley (Mr. Evans) ascribes to me a power of argument that is flattering. There are questions that must be asked, and I am sure that he would not want us to be uncritical of the arms exports regime, to which we shall refer.

We are updating the arguments, partly to allow for the legal issues, partly to allow for the allegations concerning the al-Yamamah project as a whole, partly to bring up to date the Organisation for Economic Co-operation and Development inquiry’s approach to the question, and partly to bring into the discussion the highly relevant and worrying developments in relation to the United States, which only this weekend insisted on reopening the case, and on British collaboration with that. It would probably be useful to start with an overall approach. When we introduced the debate six months ago, the key issue was the rule of law: whether it was being applied and what the law on bribery and corruption in overseas business meant. We have argued those points, and they continue to be relevant in many respects.

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The underlying theme that I wish to develop concerns the broad question of parliamentary accountability and how the new thinking that the Prime Minister has introduced, which is welcome, about greater openness in government and, specifically, greater openness about security matters should apply in this area. The key argument, to which we keep returning in the debate about the Saudi project and al-Yamamah, concerns national security interests. That argument was invoked as the reason for stopping the Serious Fraud Office inquiry, for limiting the information given to the OECD and for not proceeding with or publishing the National Audit Office investigation. It is the argument that is used for not answering most of our parliamentary questions on the subject.

Let me make it clear that just as I and my colleagues respect perfectly open, honest arms exports, we fully understand and respect arguments about national security. On a personal level, as a 30-year-old civil servant I worked in the Foreign Office, and the division that I headed included, among other things, quite an important communist country at the height of the cold war. I was fully indoctrinated in the intelligence process and the Official Secrets Act and honoured its obligations. I have always been perhaps excessively deferential to arguments based on national security. However, some fundamental questions about the workings of the intelligence and security arguments need to continue to be probed, because the Government have used them in unsatisfactory ways.

I have three points on this issue. The first concerns what could be called revelations, but are in fact points from the Government’s evidence that was submitted to a recent High Court hearing brought by The Corner House and the Campaign Against Arms Trade. The Government set out—much more specifically and helpfully than when the Attorney-General and the Solicitor-General made their statements to Parliament—how the director of the Serious Fraud Office came to the conclusion that he should not proceed on national security grounds. That showed, in quite an extraordinary way, his reluctance to come to that conclusion.

There were three steps. In December 2005, there was a so-called Shawcross exercise by other Departments, which involved, I think, the Prime Minister. The director of the Serious Fraud Office and the Attorney-General rejected the recommendation that the director of the Serious Fraud Office cease to proceed with the inquiry. On 30 September—I do not think that this has been stated to Parliament, but it was stated to the court—a letter from the Cabinet Secretary to the Attorney-General and the head of the Serious Fraud Office explained that our counter-terrorist operations might be affected adversely if he proceeded with his inquiry. At that point, remarkably, not only the head of the Serious Fraud Office but the Attorney-General rejected the advice. On 30 November, the head of the Serious Fraud Office was brought together with the British ambassador to Saudi Arabia and phrases such as “Lives were at risk” were put to him. He did not immediately cease the inquiry; it required three meetings with senior officials and the ambassador before he finally agreed, on 13 December, to do so.

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That is taken from the account that the Government have given of the chronology—I am not manufacturing any of it. [Interruption.] I have thought carefully about it, and it is all set out here in print. I am surprised that the Minister finds this so difficult; I am not referring to press reports.

The Minister for the Middle East (Dr. Kim Howells): I do not find the concept difficult to understand. I said from a sedentary position, “He thought very carefully about it.” If it took the director of the Serious Fraud Office three meetings, one would have thought that the hon. Gentleman would have been glad that it was considered seriously and over a length of time.

Dr. Cable: I am glad. It reflects well on the director of the Serious Fraud Office that he took his duties so seriously. It is clear that either he thought that the public interest in proceeding was compelling, and sufficient that he could initially ignore advice about counter-terrorism, or he found the arguments about counter-terrorism unpersuasive.

Subsequently, the director of the SFO said in evidence to the Select Committee on Constitutional Affairs, chaired by my right hon. Friend the Member for Berwick-upon-Tweed, that the one item that persuaded him to change his mind was a memorandum from the Prime Minister, to which was attached a more detailed memorandum from Sir Richard Mottram, who is a security adviser to the Government. He may not have been aware at the time, although it has since been pointed out, that that same civil servant, who I am sure is a man of enormous integrity, was, 20 years previously, private secretary to Michael Heseltine, who set up the meetings that led to the al-Yamamah agreement.Whatever Sir Richard’s competence and integrity, he was hardly disinterested.

A problem that has occurred throughout this issue is that of senior people in government—another is the head of the National Audit Office, who was also an MOD official—who, for all their high levels of competence, professionalism and integrity, do not have a disinterested position. Resurrecting my O-level Latin, I have to ask, “Quis custodiet ipsos custodes?” Who will guard the guards? I think that that is highly relevant to the present context. That is the first question that I wish to pose about the intelligence argument.

The second problem is that the argument that the counter-intelligence issues should deter an investigation sounded to us inherently implausible even six months ago because the relationship with Saudi Arabia is a two-way one, underpinned by a memorandum of understanding—I do not think that that had been made clear before—and is therefore a formal arrangement from which Saudi Arabia benefits as we do. It was unclear why one party to that agreement should imperil a bilaterally mutually advantageous arrangement.

The assertion that that argument was a compelling one has become even less plausible for two reasons. First, the embarrassment that could have been caused to senior Saudis has become history. Prince Bandar has been named and embarrassed, and all the information about his activities has now been published. If the intention was to protect him from that embarrassment,
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it is already history. Secondly, and much more serious, is the decision of the United States Department of Justice to intervene and to investigate. One has to ask why on earth the United States, which is leading the war on terror and which has far more reason to be concerned about maintaining its security relationship with Saudi Arabia than we have, should pursue a potentially embarrassing investigation into the relationships between BAE Systems and Saudi princes.

Mr. David S. Borrow (South Ribble) (Lab): Will the hon. Gentleman elaborate on the independence of the US Department of Justice and its relationship with the US Administration and the extent to which the Administration could directly influence the Department of Justice on that point?

Dr. Cable: That is a very helpful intervention. The head of the Department of Justice is, I believe, a Mr. Gonzales, who is a political appointee of the Bush Administration. If the Bush Administration had any interest in safeguarding their carefully nurtured security relationship with the Saudis, surely that would have manifested itself.

I am glad that the hon. Gentleman intervened, because he made an extraordinary remark reported in the press this morning. Apparently, following a meeting with Lord Drayson, the Minister responsible for defence export sales, he urged the Government not to co-operate with the Americans in their inquiry. It is absolutely extraordinary to say that we should put at risk our most important bilateral relationship on intelligence and security matters to protect the Saudis from further embarrassment. I can only hope that hon. Gentleman was not speaking for the Minister.

Mr. Borrow: May I clarify? The comment from me in The Guardian this morning came not from a discussion with the journalist from The Guardian, but was an interpretation of comments that I made to another journalist from my local newspaper. Those comments were interpreted without my consent and without any discussion between myself and the journalist from The Guardian, and the interpretation does not reflect the comments I made to the Lancashire Evening Post.

Dr. Cable: I thank the hon. Gentleman for his clarification, and I hope that he speaks for the Government. I will take it as read that the Government will give their maximum co-operation to our chief ally in this matter.

Mr. Mark Hendrick (Preston) (Lab/Co-op): Has it not crossed the hon. Gentleman’s mind that American interest in the subject might be due to the fact that it would have liked the contracts that BAE Systems secured, and that it would do a great deal to destabilise British industry and tens of thousands of jobs across Lancashire?

Dr. Cable: Is the hon. Gentleman seriously suggesting that President Bush and his Administration are putting at risk counter-terrorist operations to placate American companies? I do not know enough
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about the United States to know how perverted its values are, but he seems to be making an extraordinary case.

Mr. Hendrick: I do not think that the issue was a consideration for President Bush, or that intelligence between the United States and Saudi Arabia would have been affected. Obviously, the intention was to get to the bottom of a commercial arrangement, because it is in certain American companies’ commercial interests to see BAE Systems struggle.

Dr. Cable: I do not understand the logic of the hon. Gentleman’s argument at all. Why on earth should the intelligence arrangements between Britain and Saudi Arabia be compromised, but not those between the United States and Saudi Arabia? That makes absolutely no sense.

Angus Robertson (Moray) (SNP): Does the hon. Gentleman agree that we should not lose all sense of proportion, and that we must remember what the issue should surely be about? Does he not remember the once much-lauded phrase, “an ethical foreign policy”? If we are to have such a policy, and properly regulated arms exports, which my party and I support, surely there must be the highest standards of probity, and surely inquiries should not be stopped at the whim of the Government.

Dr. Cable: That is right, but in a way I am more positive and optimistic than the hon. Gentleman; the new Prime Minister said very clearly that he wants more transparency in government, and a more ethical foreign policy. I hope that he is as good as his word. If he is, this is an opportunity to demonstrate it.

Mr. Evans: I do not know what the Liberal Democrats have against BAE Systems specifically, or military manufacturing generally, because during the general election they threatened to stop the next tranche of Eurofighters if they came to power. Again, that would cost thousands of jobs. What do they have against BAE Systems in my constituency?

Dr. Cable: I have nothing against that company at all, and I welcome its continued commercial activity—providing, of course, that it abides by the law, as we all must.

Let me move beyond the arguments about intelligence to specific issues that have arisen in the past six months. The first relates to the legal position, and the differing views of the former Attorney-General and the Serious Fraud Office. As I said, those views were brought out by the Select Committee on Constitutional Affairs, chaired by my right hon. Friend the Member for Berwick-upon-Tweed. When the then Attorney-General made his statement to the House of Lords, it was said that the arguments for ceasing the investigation were not simply about national security. He has said that there were severe technical and legal difficulties in bringing any prosecution. Many distinguished people have pitched in and supported that argument, and I seem to remember that they included the hon. Member for Beaconsfield (Mr. Grieve), the Conservative spokesman, who is a
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distinguished lawyer in his own right. He put on his legal hat, as he put it, and concluded that

I am not a lawyer, but there seems to be an element of common sense to the idea that it is rather difficult to apply the law when one of the most senior members of the Government are involved. The problem is that the argument does not seem to have persuaded the head of the Serious Fraud Office, who persists in holding a contrary view. When my right hon. Friend the Member for Berwick-upon-Tweed conducted his inquiry, he specifically said to the head of the SFO that the Attorney-General

The head of the SFO, who had had several months in which to reflect, and who had no doubt received legal advice, replied:

It is important that we understand whether it is the Attorney-General who is right or the head of the Serious Fraud Office, a very senior official, who, unlike many of the other people involved in the argument, has no political axe to grind, so we must take his views seriously. If the Attorney-General, the Government and the Conservative spokesman are right, there are serious implications. The first is that we have a highly defective law governing bribery in overseas countries, which in many cases simply cannot be applied. That raises the question as to why the head of the SFO is spending taxpayers’ money pursuing further investigations, which, among other things, include South Africa, where the alleged recipient of money is none other than the vice-president, and where precisely the same argument about principles and agents could be advanced as is being advanced in the case of Saudi Arabia. If the law is defective, do the Government propose to change it? There was nothing in the sketch of the Queen’s Speech that indicated that an improvement was coming, but if the Government really believe that the law is inadequate and cannot be applied, do they have any plans to change it.?

Mr. Borrow: Will the hon. Gentleman elaborate on the changes to the law in 2001 and the extent to which that has influenced the debate, the extent to which events took place before and after the change in the law, and whether we are considering matters pre-2001 or post-2001?

Dr. Cable: I have not seen the evidence, so I do not know the answer to that question. I think that most people assume that there is an element of both. Certainly the 2001 legislation was a genuine attempt to incorporate the Organisation for Economic Co-operation and Development convention into British law. The problem that we now seem to have is that it cannot be applied, or certainly cannot be applied in cases where major figures in a recipient Government
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are involved. That is the issue. I do not know the answer and I hope that the Solicitor-General might be able to clarify that.

The Solicitor-General (Vera Baird): The hon. Gentleman asserted some time ago—I have taken this time to track it down—that it was only the Select Committee’s inquiry that disclosed the difference between Mr. Wardle and the Attorney-General. That is utterly wrong. The Attorney-General disclosed that difference of opinion about a point of law in the House of Lords when he first went there within minutes of the director of the SFO making his announcement. The hon. Gentleman should know that a process has been under way for some time to try to improve the corruption law, the Law Commission is seized of the job of doing exactly that and will produce a consultation document later this year, and that we hope for a draft Bill to be attached to it shortly thereafter with a view to legislating. It is not that the law cannot be applied, but it must be improved on and it will be.

Dr. Cable: That is a helpful clarification. On the first point, of course the hon. and learned Lady is right that the difference of view surfaced earlier. I simply mentioned it because the head of the SFO persisted with his arguments several months after the event, presumably having reflected a great deal upon it. Her final comment is helpful and positive.

The first major set of developments relates to those arguments, the second relates to the allegations—if that is what they are—by the BBC and The Guardian about the fuller aspects of the al-Yamamah inquiry. When I first mentioned the dreaded name The Guardian a few moments ago, several hon. Members jumped to their feet with outrage that we should be giving any credibility to this issue at all. However, although that newspaper is not particularly friendly to the Liberal Democrats, it is a serious newspaper, which gives the full power of editorial support to this particular story. But more important than that is the role of the BBC, which did, after all, lose a director-general and a chairman because it had not done its homework correctly on an important and sensitive issue a few years ago. I find it difficult to believe that it would have lent its credibility to a story of this kind unless it had carefully sourced and checked it.

No one has suggested that there is a contrary version of events, so let us assume for the moment that in the case of the al-Yamamah contract, what happened is broadly what has been described in that account. It means that, effectively, there are two sets of corruption allegations. Perhaps corruption is too loaded a word in this context, so let us say that there are two sets of problems. The Serious Fraud Office investigated the first problem, which dates back to a specific complaint. It originated in Robert Lee International, an intermediate company, which provided services to the Saudi royal family. There was a whistleblower, Edward Cunningham, who went to the SFO with his evidence, which was the basis on which the inquiry was launched.

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