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27 Mar 2008 : Column 157WH—continued

The Government’s new categories for extraterritorial trade control also raise a number of questions about cluster munitions. I welcome the fact that cluster munitions are now classified as category 1 arms and consequently banned in practice, and that the Government have said that they wish to see a worldwide ban on cluster bombs. However, I agree entirely with both the hon. Member for Kingswood and the right hon. Member for Tonbridge and Malling about the disingenuous distinction between smart cluster bombs and dumb cluster bombs. The right hon. Gentleman gave figures showing that the failure rate was as high as 10 per cent. for M85 cluster munitions in particular, which the Government continue
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to stockpile even though they say that they wish to see the end of stockpiling of such weapons. That shows the poor distinction between the two types of munitions. Will the Minister say what his intentions are for the forthcoming treaty? What definitions of cluster munitions do the Government intend to use as they seek, I hope, to move toward a worldwide ban later this year?

The third issue that I want to discuss is end-use monitoring. I welcome the view of the Government and the committee that EU-wide end-use monitoring is vital, but the hon. Member for Kingswood made a good point about the need to move toward end-use monitoring of torture equipment from a UK perspective. The Government have already instituted end-use monitoring of some sensitive transfers, and I wonder why they have been so unwilling to introduce a system of end-use monitoring of particularly sensitive contracts. It clearly is not practical to introduce such monitoring on all transfers—that would be impossible—but having a system that dealt with obviously sensitive transfers would be a sensible way forward.

Since the report, there have been several changes to the Government’s system of support for the arms industry. The abolition of the Defence Export Services Organisation was largely welcomed by everyone, but the full consequences of its move to UK Trade & Investment have yet to be seen. I hope that it will signal a shift such that the Government’s support for the arms industry, which needs to be specialist because of the nature of the industry, will not be substantially greater in value than their support for other industries that are equally or even more important to the UK economy.

Continuing in that vein, the continued underwriting of risk through the export credits guarantee scheme must have had its day. Estimates of the scheme’s cost to the UK taxpayer vary from £150 million a year to four times that level by some NGOs. The Government have always justified the ECG by claiming that companies often have to trade with countries that do not have developed insurance markets, but that is surely an outdated view in a well-developed derivatives market. It is difficult to see why the taxpayer should pick up the risk for such deals, given that private companies keep the profits. Similarly, the accounts of the Export Credits Guarantee Department remain somewhat opaque, and that lack of transparency leads to a widespread suspicion of bad practice. I think that the transparency issue was another reason why the committee made several recommendations on combating bribery and corruption.

There is a widespread view that the Government’s decision to halt the inquiry into the al-Yamamah arms deal severely damaged the UK’s reputation in the fight against corruption. That is certainly the view of the Foreign Affairs Committee; it also my view and that of my party. I shall not rehearse the entire debate at length, as this is not the appropriate time, but I note that this issue underscores the need for the Government to be clear and straightforward about their anti-corruption policies. They must be seen to make progress on that issue because of the impact of that decision on the UK’s reputation abroad. The committee recommended that the Government should press for provisions to be included in the arms trade treaty to promote good governance and to combat bribery and corruption. I would strongly support such moves, but there is no reason why such provisions could not already be included
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in licences. I reiterate the point made by the hon. Member for Kingswood about including criterion 8 as a means of assessment. He asked the Minister to update us regarding the review into that issue, and I, too, hope that the Minister will address that point.

Let me turn to issues of enforcement and practice rather than the need for new laws. According to parliamentary answers given in 2006, there were more than 500 breaches of arms export controls between 2000 and 2005, but just four successful prosecutions. Those cases included export seizures and unlicensed exports that were referred to Her Majesty’s Revenue and Customs by compliance officers from the Department of Trade and Industry. In his initial remarks, the hon. Member for Kingswood said that the current, low penalties do not particularly influence or affect behaviour, and seem to be poor at preventing infringement of the law. Will the Minister tell me how many staff currently scrutinise licences in the export control department? There is no point in having great law if we do not have the resources to enforce it, or if we do not ensure that there are significant consequences for breaching it.

The arms industry is highly complex and five Departments are involved in monitoring it, while four Departments are involved in scrutinising it through the committee. There have been incidents of arms exports being approved in apparent breaches of the Government’s own international policy priorities. An obvious example is the 2001 deal to sell a military air traffic control system to Tanzania for £28 million. That was an odd decision, given that Tanzania is one of the world’s poorest countries. The World Bank described the deal as a waste of money. It is obvious that we need a more joined-up approach within government, and I hope that the Government will consider how to ensure that their internal policies, particularly on international affairs, are being fed through to the scrutiny of licences and, therefore, the transfer of arms. The sale of arms is not a morality-free zone; it differs from other industries in that regard. I acknowledge that the Government have made significant progress in the past 10 years, but significantly more needs to be done.

4.6 pm

Mr. Geoffrey Clifton-Brown (Cotswold) (Con): It is a pleasure to have you in the Chair, Mr. Williams. Like other hon. Members, it is the first time I have had the pleasure of speaking when you are in the Chair.

Let me offer my sincere congratulations to the hon. Member for Kingswood (Roger Berry), who is the Chairman of the Committees. As other Members have said, but he could not say, he has done a huge job of work. Our process of scrutiny in this important field is envied by many Parliaments around the world. The hon. Gentleman is clearly holding the Government to account, and that accountability is clearly having an effect on them. Several Members have spoken today, although perhaps not quite enough for some. They have mentioned individual countries, but I shall try to avoid that because I want to keep to the generality of the report. It is a big report and I shall cover some areas that have already been covered, but others that have not.

This is an interesting day to be holding the debate, because in four days the Defence Export Services Organisation will move from its current position under
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the auspices of the Ministry of Defence to functioning under UK Trade & Investment. This country has a proud heritage of exporting arms, which is something that we depend on. Furthermore, we have been a lead player in promoting peace, human rights and decency within our borders and around the world, and our defence export industry contributes positively to the continuity of that profile. We need to uphold the highest standards in the world, so it is welcome that the Committees on strategic export controls were able to report, on page 20, that

On the whole, it is a good report.

In the face of rapid and growing globalisation, technological advances, the ever-changing nature of threats and the rise and rise of global terrorism, the challenges of legislating for and controlling exports can rarely have been greater. While remembering the positive changes that have been made since 2002, we must be all too aware of the “gaps and shortcomings” mentioned on page 20, on which I shall comment. I look forward to hearing the Minister’s answers on that issue. The report is detailed and constructive, and I hope that the Government are able to use its recommendations.

I want to touch on the important subject of compliance, because, whatever system one has, its effect is completely weakened if compliance is not good enough. The report states on evidence page 155, in the memorandum from David Hayes:

open general export licences—

Of course, that is deeply troubling given the rise of dual-use export products for use in torture, which has been referred to frequently in this debate, and violent displays of internal repression. In the transcript of oral evidence from 20 March, Mr. Oliver Sprague from Amnesty International UK suggests that the situation with OGELs is not that

I have received from the Defence Manufacturer’s Association a note about a real situation of non-compliance, in which the exporter stated:

If that is true—it comes from the DMA, which allowed me to use the quote—it is deeply worrying.

We have a situation where only 35 per cent. of companies that should be applying for export licences actually do so. Obviously, we must not ignore military exports, but I feel that there is much greater need for discussion of compliance within the dual-use and academic sectors, as in general the defence sector has a commendable record of compliance. I am sure that all Members would be most interested in hearing the Minister’s response to the report’s severe criticisms of the licensing regime for dual-use categories.

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The Minister will note further that Mr. Sprague remarked that the misuse of OGELs stood at 5 per cent. in 2004, 8 per cent. in 2005 and 11 per cent. in 2006. That is a worrying upward trend.

It was further suggested by David Hayes in his evidence that non-compliance emerges

That is on evidence page 154. He further stated in his oral evidence that

That was a point that the Chairman of the Committees made amply in his excellent speech. He used the example of the ITT Corporation in the United States, which was fined $100 million for non-compliance, whereas Avocado Research Chemicals was fined only £100 plus costs. It must surely never be the case in any compliance system that it makes economic sense to pay the fine and ignore the regulations. That cannot be right, and I ask the Minister what he proposes to do about it.

The issue of non-compliance with the regulations does not cease with domestic importers. The report suggests on page 91 that

Unfortunately, one has to look no further than the next sentence, which tells us that the committee has “serious concerns about enforcement”.

As the case is mentioned in the report, the committee will no doubt be aware of the discovery by Mr. Mark Thomas at the UK Police and Security Fair—the so-called IFSEC—that a representative of Echo Industrial Company from China had three electroshock devices on public display. It is reassuring to note that Mr. Sam Shar of the company was subsequently convicted of possession, but he was regarded as small fry—too small for the Crown Prosecution Service to warrant continuing the investigation into his dealing activities.

What was troubling about the case was that when the prosecution branch of Her Majesty’s Revenue and Customs was asked to investigate what was a prima facie breach—instruments of torture were on display—somebody from the organisation had to be summoned from the nearest airport in Birmingham. It seems to me that the very least one would expect is that enforcement officers would be on site at a major arms fair, available to deal with possible breaches and inquiries relating to breaches. That situation needs to be looked into.

I shall comment on the international system. Although the actual enforcement of the legislation and its inference for those who should have it has been demonstrated as lacking both through the committee’s words and through examples of actual failure, the UK currently has one of the most effective and broadly-based strategic export control systems in the world, but, as has been stated by several Members, there are great concerns about extraterritoriality. Members have given the example of maritime surveillance aircraft being exported to India and then re-exported to Burma. Members on both sides of the House have said that there should be a standard paragraph in every contract to prevent such re-exporting.

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I turn to another subject that is mentioned in the report: defence attachés. One of the ways that the regime can be affected is by the gathering of effective intelligence. I am fully aware of the evidence of the Secretary of State for Defence to the committee. He stated:

He went on to say that he estimated that only about 5 per cent. of a defence attaché’s time is involved in dealing with strategic licensing issues, but that is not the point. The point is that one never knows when that 5 per cent. might come into operation. The attaché spends 100 per cent. of his time looking for opportunities and intelligence, and one never knows when the 5 per cent. might come into operation.

We need to look carefully at the number of defence attachés we have around the world. Wherever I have met them, I found that they perform an admirable role and that they bed in well with other Foreign Office officials.

In paragraph 272, the committee raised an important subject: electronic transfers. They will become increasingly important. After all, at the touch of a button it is possible nowadays to send any form of technological specification and, indeed, detailed plans and maps electronically around the world. That will become increasingly difficult to detect. The committee referred to e-mail

I welcome the words on page 24 of the Government’s response to the committee that they

That is a welcome response. I ask the Minister to pay particular attention to that important subject.

In conclusion, I would like to say something about the role of the Defence Export Services Organisation and UK Trade and Investment. Defence is an important industry for the country, bringing some £5 billion-worth of exports. I would like to think that the Minister will be satisfying himself that UKTI is at least building on progress, now that responsibility has been transferred to that organisation. We in the Opposition have severe doubts about that and, like other Members, we will watch carefully how UKTI performs in the role.

As I have made clear throughout my speech, this report is an important element in the scrutiny of the Government’s functioning in this field. There are gaps and shortcomings in the current legislation and, inevitably, the task of dealing with such a complex area will present numerous challenges. It is fair to say that you cannot please all the people all the time, but we should never be led into complacency. There is always room for improvements. The British Government have one of the highest records in upholding human rights. Let us make sure that we have such a record in respect of our arms trade as well.

4.20 pm

The Parliamentary Under-Secretary of State for International Development (Mr. Gareth Thomas): I welcome the opportunity to serve under your chairmanship for
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the first time, Mr. Williams. I join other hon. Members in taking this opportunity to celebrate the work of the Committees on strategic export controls. I commend committee members generally and my hon. Friend the Member for Kingswood (Roger Berry) in particular for chairing the committee. No Minister who has had the privilege of appearing before the committee has dared take such an appearance lightly. I am sure that hon. Members think that that is entirely appropriate.

I am responding to this debate in the absence of my colleague the Minister for Energy, who has immediate responsibility for this issue but who is unable to attend today. I hope to do justice to the many questions asked and comments made by hon. Members.

Let me begin with some context. The Government are committed to maintaining a strong defence industry as part of our industrial base. The industry is important not only because of the jobs that it directly creates, but because of the many jobs that are reliant on it and because of the spin-offs to other parts of the economy generated by a strong defence industry. We have a world-class defence sector. We are the second largest exporter of defence equipment in the world, with exports close to £10 billion last year.

As all hon. Members have rightly mentioned, there are occasions when the industry is particularly controversial. In a debate such as this, however, we should also celebrate the fact that, actually, the defence industry—particularly the UK defence industry—can be a significant force for good. The key is ensuring that export controls in this country strike the right balance. Defence exports can contribute to international stability, help strengthen collective defence relationships and contribute to important humanitarian work, which is why last year we approved some 15 licences for exports to equip and support, for example, United Nations peacekeepers operating in a number of difficult settings around the world. We need to get that balance right in terms of the way in which our defence sector operates. That is why we refused a series of licences because of human rights concerns in a number of countries. I will return to the specific countries that hon. Members have mentioned.

As hon. Members have acknowledged, we have one of the best-regulated defence industries. Our controls are acknowledged as being among the most rigorous in the world. However, not content with the improved regulation of our defence sector, we are taking the lead on the introduction of an international arms trade treaty. There is now wide support for the principle of an arms trade treaty, but there is still substantial work to be done on agreeing what should be in such a treaty. Given the expertise in the Chamber today, I am sure that all hon. Members will recognise the considerable complexity of the discussions that are under way about what such a treaty should contain. We want an arms trade treaty to help set global standards for the arms trade to ensure respect for human rights, international humanitarian law, sustainable development and good governance, at the same time as allowing states to participate in the arms trade.

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